Euro perkier, commodity currencies shine

SYDNEY Fri Sep 28, 2012 4:50am IST

Euro notes are pictured at a bank in this photo illustration taken in Seoul June 18, 2012. REUTERS/Lee Jae-Won

Euro notes are pictured at a bank in this photo illustration taken in Seoul June 18, 2012.

Credit: Reuters/Lee Jae-Won

SYDNEY (Reuters) - The euro held firm on Friday, while commodity currencies started Asian trade sharply higher as worries about the euro zone eased somewhat after Spain unveiled a crisis budget that many saw was a step towards a bailout.

The single currency stood at $1.2911, having bounced from a two-week low of $1.2828 set on Thursday. Initial resistance is seen at $1.2960, the 38.2 percent retracement of its Sept 17-27 slide.

The rebound in the euro knocked the dollar index .DXY to 79.556, off a two-week peak of 80.012 set this week.

Beset by anti-austerity protests and threats of secession by the wealthy northwestern region of Catalonia, Spain also announced a timetable for economic reforms that EU Economic and Monetary Affairs Commissioner Olli Rehn says goes beyond what the European Commission required.

All this is widely seen as paving the way for eventually seeking a bailout. Madrid is talking to EU authorities about the terms of a possible aid package that would trigger an European Central Bank bond-buying program and ease its unsustainable funding costs.

Analysts warned there are still many hurdles ahead and said the news merely gave markets an excuse to book profits on recent bearish trades.

Indeed, the budget goes to parliament on Saturday and debates could last weeks. Spain's 17 autonomous regions still must present budgets and find an additional 5 billion euros in adjustments to meet overall public deficit reduction goals.

"The budget represents two steps forward and one step back, which is why the euro only moved slightly higher," said Mary Nicola, a strategist at BNP Paribas.

Markets are now waiting for Moody's review of Spain's sovereign rating, due at the end of the month. On Thursday, ratings agency Egan-Jones cut Spain's sovereign rating further into junk status, citing the country's faltering banks and struggling regional governments.

The euro also rose on the yen, pulling up to 100.22 from a two-week low of 99.64 plumbed Thursday. The greenback, however, softened against the Japanese currency, slipping to 77.63.

Among the biggest gainers were commodity currencies, which had been hit hard in the past few sessions. The Australian dollar climbed as high as $1.0458, more than one full cent above a two-week trough of $1.0328 set mid-week.

Resistance is seen at $1.0476, the 50 percent retracement of its Sept 14-26 fall, ahead of $1.0512 and then the Sept 14 peak of $1.0625.

Partly helping the Aussie is renewed hopes that China, Australia's single largest export market, will deliver more stimulus to stem its economic slowdown.

A Chinese central bank adviser said on Thursday that Beijing had severely underestimated this year's global economic slowdown and further cuts to interest rates or bank reserve requirements hinge on any new deterioration in the external environment.

(Editing by Wayne Cole)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Microsoft Earnings

Microsoft Earnings

Microsoft sales beat Street hopes, cloud profits up.  Full Article 

U.S. Economy

U.S. Economy

Spectre of no-inflation world looms over Fed's return to normal  Full Article 

Insider Trading

Insider Trading

Rengan Rajaratnam, SEC to settle civil insider trading charge.  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Market Watch

Market Watch

Betting on the beaten up? Investors pin hopes on stocks in Europe, Japan.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage