NEW YORK: The euro soared to its highest in 15 months against a weaker dollar on Wednesday, boosted by higher risk appetite and after a bond auction from Spain was well received by investors.
The response to the Spanish auction provided a fillip to the euro zone common currency which is eyeing its Jan. 13, 2010 high. Traders said before that, the euro would have to clear option barriers at $1.4550 and $1.4600.
"This is not a euro-centric move and instead is a broadly based US dollar move," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto. "Loose US monetary policy juxtaposed against a European tightening cycle, a warning from S&P that with no credible plan in place the US risks the loss of its AAA status and negative US dollar sentiment have pushed the euro zone problems to the background."
The euro rose 1.2 percent versus the dollar to $1.4502, pulling further away from this week's low of around $1.4155. Traders said stop-losses were triggered through last week's high of $1.4521 and on the break of $1.4530. The session high posted at $1.4546 on Reuters data.
The euro jumped 1.1 percent to 119.70 yen, moving away from a two-week trough hit this week. Trading conditions were thin with many dealers already out for the Easter break.
Data showing business activity in Germany and France continued to outpace the rest of the common currency bloc has kept alive European Central Bank rate hike expectations.
Both the dollar and the yen are usually sold off when risk appetite is buoyant. Demand for riskier assets like stocks and higher-yielding currencies picked up as upbeat corporate earnings in the US raised growth expectations.
Market sentiment was calmer after nerves were rattled on Monday by S&P's warning on US credit ratings and on fears that Greece will have to restructure its debt.
"Investor focus is on the earnings season in the US and this is key in driving growth expectations and pushing stock markets higher. This keeps the focus away from the euro zone periphery right now," said Manuel Oliveri, currency strategist at UBS in Zurich.
COMMODITY CURRENCIES BUOYANT
The chase for yields benefited the Australian dollar, which hit a fresh post-float high of $1.0692. It last traded at $1.0671, up around 1.4 percent on the day.
Traders said stop-losses were hit on the break of $1.0610 and $1.0650.
The Canadian dollar rose to its highest in over three years against its US counterpart, buoyed by above-forecast Canadian inflation on Tuesday and rising commodity prices.
All of which saw the dollar index fall to a 16-month low.
Traders said talk of central banks recycling intervention proceeds into growth-linked currencies and the euro was also leading to a drop in the US dollar.
The dollar swung between gains and losses against the yen and was last down 0.1 percent from late US trade on Tuesday at 82.51 yen. Traders said Japanese exporters' offers were layered in the 83.20-83.50 area with stops seen above 83.50.
Sterling fell sharply against the euro after Bank of England minutes showed policymaker caution about economic growth outweighed inflation worries. The euro was at 88.43 pence, up 0.7 percent on the day.
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