Euro pauses after rally as high-yielders firm

By Anirban Nag

SYDNEY (BestGrowthStock) – The euro steadied near two-week highs on Wednesday, while demand for high-yielding currencies like the Australian dollar was underpinned by a general improvement in risk taking.

Investors set aside concerns about the euro zone’s financial sector and soft economic data for the moment to buy riskier assets, higher-yielding currencies and the euro.

Stocks on Wall Street rallied more than 2 percent with the S&P 500 (.SPX: ) turning positive for the year and rising above its 200-day moving average for the first time in a month, suggesting the recent downtrend may be nearing an end.

Traders said the positive momentum carried through from higher U.S. stocks (Read more about the stock market today. ) should see higher yielders underpinned in the Asian session. Also supporting the euro was a solid response to a Spanish debt auction.

The euro was up at $1.2315, having risen to as high as $1.2349, the strongest level since June 1, on Tuesday.

Near term resistance for the euro is seen at this month’s high of $1.2353 and then at the Fibonacci retracement level of around $1.2550, which is the 38.2 percent from the April 14 high to its June 7 low.

Traders do not rule out a short squeeze in the euro which could take it higher.

“The data flow was soft, but at the moment investors are not focusing on that,” said John Horner, currency analyst at Deutsche Bank. “The price action suggests that both the euro and the Aussie’s rally in the past few sessions have a bit to run.”

Data on Tuesday showed a surprisingly large fall in an index of German investor sentiment, while U.S. home builder sentiment fell in June by the sharpest amount since the height of the financial crisis.

But investors set aside those numbers, preferring to look on the bright side after Spain raised 5.2 billion euros at auctions for 12- and 18-month bills. Belgium netted 2.5 billion euros in an oversubscribed auction of its own.

As a result, the U.S. dollar and the yen stayed under some pressure. Both currencies are favored when risk aversion and volatility spikes. Euro/yen was marginally lower at 112.60 yen, having jumped nearly 0.9 percent in the previous session.

The dollar index (Read more about the global trade. ) (.DXY: ) was at 86.10, hovering above support near the 85.85 area which is the index May 28 low. The dollar was steady at 91.44 yen, after slipping about 0.1 percent on Tuesday.

Meanwhile, the Australian dollar held onto broad gains, trading at $0.8640, not far from its one-month high of $0.8666 struck on Monday.

Stock Market Advice

(Editing by Wayne Cole)

Euro pauses after rally as high-yielders firm