Reuters: US Dollar Report: FOREX-Euro near 7-wk high, Aussie still fragile

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FOREX-Euro near 7-wk high, Aussie still fragile Aug 29th 2012, 03:30 Tue Aug 28, 2012 11:30pm EDT * Euro firmer across the board after short-covering * Hopes high ECB to unveil crisis-fighting plan next week * News from Spain not so rosy * Aussie sees no reprieve, hits 8-week lows on euro By Ian Chua and Hideyuki Sano SYDNEY/TOKYO, Aug 29 (Reuters) - The euro held near its seven-week peak on Wednesday, having been swept higher by a wave of short covering overnight, while the Australian dollar languished at one-month lows on persisting worries about Chinese growth. Traders said news that European Central Bank President Mario Draghi was too busy to attend Friday's Jackson Hole meeting of central bankers had renewed hopes he could announce a long-awaited plan to tackle the region's debt crisis at the ECB's Sept. 6 policy meeting. The single currency stood at $1.2558, after gaining more than half a percent to reach a high of $1.2577 on Tuesday, coming close to seven-week peak of $1.2590 hit last week. Against the yen, the euro drifted up to 98.72 yen, not far from last week's 1 1/2-month high of 99.185 yen. "Short covering was the main catalyst behind the euro price action. We remain long EUR/USD, targeting $1.28 and EURJPY targeting 101.63 yen," analysts at BNP Paribas wrote in a note. The euro's gain also came after both Italy and Spain saw their borrowing costs fall at debt auctions on Tuesday, an encouraging sign for Milan's more challenging long-dated debt sale on Thursday. However, news out of Europe was not all rosy with figures showing the Spanish economy had fallen deeper into recession and the country's most economically important region, Catalonia, said it needed a major rescue from Madrid. Some market players also questioned whether Draghi's decision to skip a visit to Jackson Hole is a good sign. "Is it really a good sign that a central bank governor suddenly cancel his plan? The market may be reading it wrong. It could be because he has some urgent issues to deal with," said Kimihiko Tomita, forex manager at State Street, noting that the ECB data showed private-sector deposits at Spanish banks fell at a record pace in July. Still, the rebound in the common currency saw the dollar index fall back towards a two-month trough of 81.221 last Thursday. Traders say the dollar could fall beyond that low if U.S. Federal Reserve Chairman Ben Bernanke drops a clear hint that the Fed might start a new asset purchase soon in his speech on Friday at the Jackson Hole conference. Before that speech, the dollar is expected to be range-bound. The greenback was steady against the yen at 78.60 yen. The Australian dollar continued to wallow near one-month lows. The Aussie stood at $1.0368, near one-month low of $1.0345 hit on Tuesday. The Aussie plumbed an eight-week trough against the euro, which reached A$1.2123. The single currency has gained around 4.5 percent since hitting a record low around A$1.1597 early this month. A confluence of factors have conspired to knock the Aussie lower in recent days including the slowdown in China, Australia's single biggest export market, and worries about the longevity of the country's mining investment boom. Link this Share this Digg this Email Reprints

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