NEW YORK: The euro rose to a three-week high against the US dollar on Thursday and headed for a second quarterly gain as Greece edged closer to securing international aid and on expectations euro zone interest rates will rise again next week.
Month-end flows also supported the euro, helping propel it above $1.45 where offers from sovereign names were reported. The euro also climbed to a 15-month high against a broadly weaker sterling.
Greece approved a five-year austerity plan on Wednesday and the result suggested the government should be able to push through a second package detailing specific implementation measures on Thursday. Greece must pass both bills to receive further aid it needs to avoid a default next month.
"For euro traders Greek risk appears to have peaked," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto.
The euro climbed to a high of $1.4522 on trading platform EBS, before retreating to trade up 0.3 percent at $1.4473 after failing to hold above resistance at $1.45.
Richard Wiltshire, chief FX broker at ETX Capital, said the euro was helped by hefty month-end buying of euro/sterling, some of which could reverse on Friday or next week.
Traders also cited offers from sovereign names ahead of a reported options barrier at $1.4550. Support is seen in the mid-$1.44 region.
The euro rose 0.6 percent to 90.37 pence, having hit a 15-month high of 90.70 pence, the strongest level since March, 2010.
Some analysts said the euro could rally towards $1.5000, but many remained wary about whether Greece will be able to implement harsh austerity measures and expected the euro's rise to be limited.
"Euro zone rates are more likely to rise than those in the US and the UK and this will keep the euro supported against the dollar and sterling," Wiltshire said. "But I can't see a huge reason to buy the euro as Greece is not out of the woods yet."
For the first half of the year, the euro is on pace for a gain of about 8.0 percent against the dollar.
The dollar fell 0.5 percent to 80.35 yen, on track for a loss of 3.4 percent this quarter and 1.1 percent so far this year.
ECB RATE OUTLOOK
The European single currency also found support after the European Central Bank signaled it would raise interest rates again next week as data showed inflation in June well above the bank's target. See
A 25-basis-point hike would lift the ECB's benchmark rate to 1.5 percent, further moving interest-rate differentials in favor of the euro against the US dollar.
Some analysts also saw further scope for short-term gains as talks progress on a second aid package for Greece, with investors taking the view that the euro zone debt crisis is under control for the time being.
More encouraging US economic data including recent housing figures, and signs the Japanese economy may be recovering more quickly from its earthquake than expected, were also helping improve outlook for the global economy through the second half of 2011.
Deutsche currency strategist Henrik Gullberg said this view would further stoke risk appetite, prompting investors to take on more long euro positions -- or bets to buy the currency -- after cutting back on those positions recently.
Increasing concerns about the US debt situation could also sour sentiment for the dollar as Washington struggles to raise its budget limit.
The New Zealand dollar earlier climbed as high as $0.8320, its strong level since it was floated in 1985.
COPYRIGHT REUTERS, 2011
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