FOREX-Euro hits 15-month high vs broadly weak dollar

* Euro extends rise after breaching resistance this week

* Risk-on sentiment hurts dollar and yen

* Aussie at 29-yr high; USD weighed by looming govt shutdown

By Jessica Mortimer

LONDON, April 8 (Reuters) – The euro rose to a 15-month high
against the dollar on Friday, staying well-supported in the wake
of a euro zone rate hike, while the prospect of a U.S.
government shutdown pushed the dollar lower across the board.

The euro (EUR=: Quote, Profile, Research) rose as high as $1.4422, though traders said
it may struggle ahead of a large options barrier at $1.4430,
which was expected to be heavily defended.

The dollar fell to its lowest since December 2009 versus a
basket of currencies as the White House and Congress worked
frantically to break a U.S. budget deadlock by the end of the
day and avoid a government shutdown. [ID:nN08144565]

Investors were also lured by the prospect of higher yield,
helping the Australian dollar to a fresh 29-year high versus the
greenback while the low-yielding Japanese yen suffered, hitting
an 11-month low versus the euro.

“We’re seeing broad-based dollar selling, especially against
currencies with a favourable yield,” said Carl Hammer, currency
strategist at SEB in Stockholm.

“With all the focus recently on debt problems in the euro
zone periphery, what is going on in the U.S. highlights that the
U.S. has budget problems of its own, while the euro continues to
be driven by the prospect of more rate hikes”.

The ECB raised its key interest rate by 25 basis points to
1.25 percent on Thursday and the central bank’s president
Jean-Claude Trichet signalled it was ready to tighten further if
needed. [ID:nLDE7351QH]

On balance, the comments were interpreted as making
aggressive rate hikes look less likely, but the euro dipped only
briefly afterwards and analysts said the prospect of another
rate rise this summer would continue to support the single

The euro was up 0.75 percent to $1.4411 (EUR=: Quote, Profile, Research). The euro’s
rise has extended following its breach this week of resistance
near $1.4283, its November high and roughly where it faced
trendline resistance drawn from its July 2008 record high.

Beyond $1.4430, the euro will target the $1.4500
psychological level and then the January 2010 high around
For a chart on the euro:
ECB in graphics:
The euro zone’s debt struggle:


Market players said the yen looked set to weaken further on
the back of interest rate differentials, and concerns about the
economic impact from a massive earthquake and tsunami that
struck Japan’s northeast on March 11.

The euro rose more than 1 percent to an 11-month high of
122.90 yen (EURJPY=R: Quote, Profile, Research), according to Reuters data.

This took it well above the top of the weekly Ichimoku
cloud, a form of Japanese technical analysis widely used by
market players, at around 122 yen. A weekly close above there
would be seen as a buy signal.

“The dollar and yen are coming under pressure as investors
are more comfortable with risk,” said Christopher Gothard, head
of FX for Brown Brothers Harriman in Hong Kong.

“There are good signs about the strength of the global
recovery despite events in Japan, and for the moment that is
boosting confidence and boosting risk assets”.

The dollar index (.DXY: Quote, Profile, Research) fell as low as 75.109, while the
high-yielding Australian dollar (AUD=D4: Quote, Profile, Research) jumped to a 29-year
high of $1.0539.

The dollar rose against the yen, however, trading up 0.3
percent at 85.21 yen (JPY=: Quote, Profile, Research), nearing a six-month high of 85.530
yen hit earlier this week.
(Additional reporting by Masayuki Kitano in Singapore)

FOREX-Euro hits 15-month high vs broadly weak dollar