Euro firm near 2-month peaks

By Anirban Nag

SYDNEY (BestGrowthStock) – The euro was holding firm near two-month peaks against a softer U.S. dollar on Wednesday, with investors adding to long positions in high-yielding currencies amid a seemingly significant improvement in risk appetite.

The dollar could come under more pressure, especially against higher-yielding currencies, in reaction to robust U.S. corporate earnings. Intel Corp (INTC.O: ) reported results above expectations and gave an upbeat sales outlook, pushing S&P futures higher (.SPX: ).

Traders said funds were increasingly moving out of cash and low-yielding U.S. Treasuries to buy euro and growth-related currencies. Helping drive sentiment was a strong start to the U.S. corporate earnings season and easing concerns about euro zone’s sovereign debt and the financial sector.

In Asian trade, the euro was firm at $1.2720, having jumped nearly 1 percent in the previous session. It hit a two-month peak of $1.2739 on Tuesday, brushing aside a Moody’s downgrade of Portugal’s sovereign rating by two notches.

Instead, investors chose to pay more heed to the strong response to a six-month treasury bill tender by Greece. The debt-laden country sold 1.625 billion euros ($2.03 billion) of T-bills at a better rate than it pays to borrow under a European Union/International Monetary rescue fund.

“What we are seeing is that cash is being put back to work with all the negative news surrounding the euro zone receding,” said Greg Gibbs, currency strategist at RBS, Sydney.

“Some of the risk premium that was being attached to the euro zone is being taken off. The downgrade of Portugal was very much expected and I think we could see the euro rise a bit more from here.”

Chartwise, resistance is seen at $1.2767, the target of an A-B-C wave sequence starting from the euro’s four-year low of $1.1876, with the C-wave starting at $1.2152. The next target comes in at $1.2780, which is a 50 percent retracement of its fall from mid-April to the June low.

The euro jumped to three-week highs of 113.03 yen, having advanced nearly 0.85 percent on Tuesday. The low-yielding yen was broadly under pressure, giving up gains even against the U.S. dollar. The yen, considered to be a safe-haven investment, is usually sold off when risk appetite improves.

The dollar was up at 88.83 yen, from 88.44 yen late in New York on Tuesday, although resistance is seen around the 89.00/15 area.

The dollar index (Read more about the global trade. ) (.DXY: ) was down at 83.56, having broken trendline support. New support is seen around 83.20, the 38.2 percent retracement of the index’s rise from a low of 74.17 in November 2009 to a high of 88.59 on June 8.

Other major U.S. corporates to report quarterly earnings this week include banks JPMorgan Chase & Co (JPM.N: ) and Bank of America Corp (BAC.N: ).

The dollar will also take direction from a slew of U.S. economic data slated for Wednesday. Mortgage reports will be followed by readings on export and import prices for June, retail sales for the same month and business inventories for May.

Sterling was up 0.1 percent $1.5190, well off Tuesday’s low beneath $1.50, after quarterly consumer price inflation remained above the Bank of England’s 2 percent target rate.

Meanwhile, the Aussie and New Zealand dollars held near two-month highs. The Aussie climbed to $0.8836 with resistance at the June high of $0.8860, and at $0.8885, the 100-day moving average and 61.8 percent retracement of April 12 to May 25 slide.

The New Zealand dollar pared some of its impressive gains to trade at $0.7180 after retails sales in May rose less than expected. Still, it did little to alter expectations of more rate rises.

Euro firm near 2-month peaks