Euro extends gains on short squeeze, Aussie up

By Anirban Nag

SYDNEY (BestGrowthStock) – The euro extended gains on Friday, as hopes of a quick Greek rescue package spurred investors to cover short positions, while the Australian dollar rallied on growing talk of a interest rate hike next week.

Gains in the euro could be tempered by the pound’s advance against the single currency. The euro was subdued against the pound, falling to 0.8636 pounds from Thursday’s high of 0.8733.

The euro rose to $1.3260 in Asian trade, from $1.3242 late in New York on Thursday, as stops were taken out in thin conditions, leading to a short squeeze.

Investors are heavily short the euro, so any hopes of a quick European Union/International Monetary Fund aid package for debt-laden Greece is providing some relief to the euro.

Still, overall sentiment remains bearish and traders say it is on track to test $1.31, the 76.4 percent retracement of its move up from a low of $1.2440 in March 2009 to a high of $1.5140 in November last year.

European Union Economic and Monetary Affairs Commissioner Olli Rehn said the EU should complete talks “within days.” But Rehn said he still could not provide details of the deal, which he said were conditional upon fiscal consolidation.

Investors were comforted by signs the aid package for Greece could be worth as much as 100 billion to 120 billion euros ($133 billion-$158.5 billion) over three years — much more than an earlier reported 45 billion euros.

The Financial Times carried a story which said Greece has agreed to a 24 billion euros austerity package, including a three-year wage freeze for public sector workers, in return for a multibillion-euro loan.

“The situation, though, remains highly fluid with FX markets trading on headlines as they hit the wires,” JP Morgan said in a note. “We remain cautious in our view toward the euro precisely for this reason but remain more confident in being short where there is a strong macro fundamental reason to do so.”

Sterling, one of the star performers in the previous session, extended gains to $1.5347, from $1.5322 late in New York on Thursday when it gained 0.8 percent. Traders said the pound was helped in part by data which showed rising UK house prices and on talk of buying by sovereign funds.

All of which meant that the dollar index (Read more about the global trade. ) (.DXY: ) was trading 0.1 percent lower at 81.918.

In Asia, the Bank of Japan meeting will be watched by traders. It is universally expected to leave rates unchanged at 0.10 percent with inflation still in negative territory. [nTOE63Q08T]. Data released on Friday showed March nationwide core consumer prices fell 1.2 percent, as forecast.

The dollar/yen was broadly steady at 94.00 yen while euro/yen marginally firmer at 124.65 yen.

Meanwhile, the Australian dollar rallied to as high as $0.9315 from $0.9275 late in New York on Thursday. Traders said buying by some Japanese entities pushed up the Aussie, while mounting speculation that the Reserve Bank of Australia will raise rates next week also supported sentiment.

Stops above $0.9300 were triggered early on Friday with traders saying more were lined up above $0.9330.

Stock Today

(Editing by Wayne Cole)

Euro extends gains on short squeeze, Aussie up