FOREX-Euro near two-month highs, USD dips on dovish Fed
08/02/2012 at 01:12
* Euro to meet heavy resistance at $1.3332
* USD undermined by dovish Fed
* Yen weaker on USD and euro
By Cecile Lefort
SYDNEY, Feb 8 Reuters - The euro was holding near a two-month peak in Asia on Wednesday, as hopes that Greece was nearer a debt deal sparked a broad short-covering rally and a pick up in risk sentiment.
Investors have been worried that a failure to secure a 130 billion euro $170 billion rescue could push Athens into a chaotic debt default and destabilise the entire euro zone.
The euro stood at $1.3248
The surge, however, was more due to a squeeze in short-positions, rather than on a view that all is well in Europe.
While there are suggestions Greece is close to an agreement, Athens politicians have yet to agree to painful austerity measures to receive a second bailout package. They have delayed, once more, the deal deadline to Wednesday.
"There seems to be a lot of complacency in the market," said Rob Ryan, a strategist at BNP Paribas in Singapore.
"How long can you give the process the benefit of the doubt, 'I am sure they will come to a solution'?"
Ryan is doubtful the euro rally will be sustained unless Greece agrees to a deal.
The next level of resistance for the euro is found at the 100-day moving average of around $1.3332, ahead of $1.3432, the 50 percent retracement of the decline from the late October high of $1.42480 to the mid-January low of $1.26260.
The Aussie dollar held much of the gains it made after the Reserve Bank of Australia kept interest rates steady on Tuesday, surprising most investors who had wagered on a cut.
The Australian dollar powered up to a six-month high of $1.0823 against the dollar
The risk rally saw the dollar index retreat 0.7 percent to a two-month trough of 78.488.
The greenback was also undermined after U.S. Federal Reserve Chairman Ben Bernanke kept alive the chance of more quantitative easing, despite Friday's upbeat jobs report .
Against the yen, the dollar stood at 76.78 yen
The yen came under pressure after Japanese Finance Minister Jun Azumi reiterated Tokyo is ready to step in again to counter speculative moves. The yen remains uncomfortably close to three-month highs touched last week with markets wary of Japanese intervention to curb its currency.
Japan on Wednesday reported its current account surplus had fallen 75 per cent to 303 billion yen in December, while for all of 2011 the surplus had dropped by the most on record to 9.6 trillion yen.
This shrinkage could undermine the yen if sustained as the Japanese earn less foreign currency to switch into yen.
Additional reporting by Reuters FX analyst Krishna Kumar; Editing by Wayne Cole
cecile.lefort@thomsonreuters.com+61 2 9373 1234RM: cecile.lefort.thomsonreuters.com@reuters.net
Keywords: MARKETS FOREX