NEW YORK: The euro headed for its first weekly rise in four weeks against the US dollar on Friday, but further gains looked limited as investors believed Greece's debt crisis was far from over despite easing fears of an immediate default.
The European single currency earlier climbed to a three-week peak above $1.45, helped by an increase in risk appetite. It then retreated as traders squared positions ahead of the long holiday weekend in the United States.
The Greek parliament passed two crucial austerity bills this week, opening the way for international lenders to release a 12-billion-euro ($17 billion) loan installment that Athens urgently needs to stave off bankruptcy.
Uncertainty about the longer-term solution remained, and euro-zone finance ministers are scheduled to hold preliminary talks this weekend on the second financing package for Greece for 2011-2014, which could total up to 120 billion euros ($175 billion).
"We've gone from basically $1.41 to $1.45. I think that's a good level as far as the rebound is concerned," said Ronald Simpson, director of currency research at Action Economics in Tampa, Florida.
"I've heard talk yesterday and today of investment fund flows out of the euro over $1.45. I think the smart money is looking at levels to sell here now rather than buy."
In early trading, the euro slipped 0.3 percent to $1.4460. It had earlier risen as high as $1.4553 on trading platform EBS in a move that pushed through a big options barrier around $1.4550. It was up about 2 percent this week.
The euro hit a three-week high of 1.2301 Swiss francs as investors cut back long positions in the safe-haven Swiss currency. It was last up 0.5 percent at 1.2246.
The dollar climbed 0.9 percent to 0.8477 franc, moving further away from a lifetime low of 0.8276 set on EBS earlier in the week. Traders cited corporate-related demand from Swiss banks as driving the dollar higher.
ECB RATE VIEW
On the upside, euro resistance is seen at around $1.4570, the 61.8 percent retracement of the euro's fall from its high on May 4 to its low on May 23.
Support is seen around $1.4460, traders said, which was followed by levels around $1.4405, where its 55- and 21-day moving averages were located.
Some analysts said the market may start to rebuild long euro positions ahead of an expected interest-rate hike by the European Central Bank next Thursday, which would further move interest-rate differential in favor of the euro.
"There is a bit more upside in the euro ahead of the ECB meeting and if (President Jean-Claude) Trichet strikes a hawkish bias," said Chris Walker currency strategist at UBS. "But a lot will be contingent on current economic conditions."
Data on Friday showed purchasing managers' indexes in Asia and Europe slid to multi-month lows in June as factories fought a twin battle with weaker consumer demand overseas and tightening monetary policy at home.
The United States is slated to release its manufacturing survey results later in the session.
Risk appetite increased on Thursday after data showed factory activity in the US Midwest accelerated in June, fostering hopes of a pick-up in growth.
But Citigroup strategist Valentin Marinov said the latest rebound in risk appetite seems to be happening against the background of stabilizing but not yet improving global economic indicators.
"Looking at the bigger picture," Marinov said, "it still seems that the rebound in risk appetite is generally lacking support in the form of positive fundamental surprises in the G10 and emerging markets."
Copyright Reuters, 2011
Comments
Comments are closed.