Euro extends bounce, Aussie firm on rate hike talk

By Anirban Nag

SYDNEY (BestGrowthStock) – The euro held firm on Tuesday, as investors pared some of their record short positions ahead of the quarter-end and with sentiment also boosted by Greece’s ability to raise money from the debt market.

Speculators have built up record short positions against the euro in recent months and traders say the single currency is likely to receive some support as some of those positions are unwound before the quarter ends on March 31.

In early Asian trade, the euro was up at $1.3483, from $1.3477 late in New York on Monday when it gained 0.5 percent.

Near term resistance for the euro is seen around $1.3506, its Monday high, Subsequent resistance is around $1.3540, which is the 50 percent retarcement of the currency’s decline from a high of $1.3817 on March 17 to a low of $1.3265 on March 26.

The euro had hit a 10-month low below $1.33 last week, but then rebounded to rise above $1.35 on Monday as Greece returned to capital markets for the first time since euro zone leaders agreed to extend the country a financial safety net.

Greece’s debt management agency said it sold 5 billion euros ($6.72 billion) of new seven-year debt at 5.9 percent, a yield more than twice what Germany pays.

Despite recent gains, analysts saw limited upside potential for the single currency, given that the euro zone’s debt problems and weak growth meant the European Central Bank was in no rush to hike interest rates.

“This appears to be a short term reprieve for the euro,” said John Horner, currency strategist at Deutsche Bank. “Apart from the festering debt-related problems, I think some strong U.S. data later this week could also give a lift to the U.S. dollar.”

Indeed, investors were a bit more optimistic about the U.S. economy, with payrolls data due later this week expected to show employers added 190,000 new jobs in March.

A government report on Monday showed U.S. consumer spending rose as expected in February for a fifth straight month. Markets do not expect the Federal Reserve to raise rates from record lows until the second half of the year at the earliest, though most see U.S. rates rising faster than those in Europe or Japan.

The dollar index (Read more about the global trade. ) (.DXY: ) was down 0.12 percent at 81.26 with charts suggesting some consolidation, now that it had fallen below the 81.35 breakout level.

In the U.S., investors will watch out for consumer confidence and S&P Case/Shiller house prices later in the session.

The dollar was little changed at 92.48 yen, although traders will eye selling by Japanese exporters ahead of Japan’s fiscal year-end.

Meanwhile, the Australian dollar, was firm at $0.9160, after posting its biggest one-day rally in six weeks, helped by growing talk of a rate hike and higher commodity prices.

An Australian central bank watcher argued the Reserve Bank of Australia (RBA) is likely to lift interest rates here next week to 4.25 percent.

RBA watcher Terry McCrann argued that it would be “extraordinary” for the RBA to not lift rates next week after Governor Glenn Stevens, appeared in a television interview on Monday to say rates had been too low and could not stay at previous levels.

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(Editing by Wayne Cole)

Euro extends bounce, Aussie firm on rate hike talk