Reuters: US Dollar Report: FOREX-Euro, commodity currencies hold gains; PMIs eyed

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FOREX-Euro, commodity currencies hold gains; PMIs eyed Jul 1st 2012, 23:42 Sun Jul 1, 2012 7:42pm EDT * Euro steadier after posting best gains in eight months * Markets still buoyed by Europe's move to resolve debt crisis * China PMI not as bad as feared; Europe, U.S. next in focus By Ian Chua SYDNEY, July 2 (Reuters) - The rally in the euro and high-beta currencies took a breather on Monday as investors looked for fresh reasons to extend a risk rally sparked by initial euphoria over perceived progress in efforts to resolve Europe's debt crisis. Having surged some 1.7 percent on Friday -- its best one-day gain in about eight months -- the single currency last traded at $1.2656, just a tad below a one-week peak of $1.2693. Markets cheered after euro zone leaders agreed on Friday to let their rescue fund inject aid directly into stricken banks and intervene on bond markets to support troubled members. They also took a step towards banking union by pledging to create a single banking supervisor. Traders said gains in Asian stocks, which were poised to rise, could further support the euro and commodity currencies in the short term. "The last two weekends' attempts at providing (market) support -- Greek elections, EFSF funding for Spanish banks -- bought less than a day's worth of rally in risk assets," analysts at JPMorgan noted. "This one should last a bit longer, as it achieved a lot more, but will likely over the next month run into resistance from weak economic data and some back sliding on the EMU summit as official haggle over the details." The market's immediate focus is the latest reading on European and U.S. manufacturing sectors. China reported on Sunday that its factory activity had slowed to seven-month lows in June, although the outcome was not as bad as feared. Commodity currencies, usually bought in times of heightened risk demand, held onto most of Friday's gains. The Australian dollar was at $1.0245, not far off a two-month high of $1.0260 set on Friday, when it posted its biggest rally in seven months. Not surprisingly, both the safe-haven U.S. dollar and yen nursed heavy losses. The dollar index was at 81.651, having plunged nearly 1.5 percent on Friday to a one-week trough of 81.430. The greenback managed to outperform the yen, rising to 79.94 from Friday's low of 79.08. The euro fetched 101.19 yen , well up from last week's trough of 98.34, while the Aussie reached a fresh two-month high of 82.00 yen. Also featuring this week will be a meeting of the European Central Bank, when many expect it to cut interest rates by a quarter point, while the Bank of England is likely to expand its bond buying program. Link this Share this Digg this Email Reprints

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