Reuters: US Dollar Report: FOREX-Short squeeze lifts euro, Aussie dlr still fragile

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FOREX-Short squeeze lifts euro, Aussie dlr still fragile Aug 28th 2012, 23:17 Tue Aug 28, 2012 7:17pm EDT * Euro firmer across the board as markets trim bearish positions * Hopes high ECB will announce crisis-fighting plan next week * Aussie sees no reprieve, hits 8-week lows on euro By Ian Chua SYDNEY, Aug 29 (Reuters) - The euro held firm in Asia on Wednesday, having been swept higher by a wave of short covering, while the Australian dollar languished at one-month lows on persistent worries about Chinese growth. Traders said news that European Central Bank President Mario Draghi was too busy to attend Friday's Jackson Hole meeting 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 $1.2564, after gaining more than half a percent to reach a high of $1.2577. Traders said stop-loss buying was triggered following the break of $1.2500 and $1.2540. Immediate resistance is seen at $1.2590, a seven-week peak scaled on Thursday. Against the yen, the euro drifted up to 98.73, but it jumped more than 1 percent on the New Zealand currency to an eight-week high of NZ$1.5637. "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. The rebound in the common currency saw the dollar index fall back towards a two-month trough of 81.221 set last Thursday. The greenback also lost ground on the yen, slipping to 78.55 from Tuesday's high around 78.78. But it held its ground against the Australian dollar, which continued to wallow at one-month lows. The Aussie stood at $1.0368, having slipped to $1.0346, a level not seen since July 26. 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. There is no major data out of Asia on Wednesday, in Europe German inflation and Italian retail sales are on offer. Link this Share this Digg this Email Reprints

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