Reuters: US Dollar Report: FOREX-Euro rests near 2-month high, pins hopes on ECB

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FOREX-Euro rests near 2-month high, pins hopes on ECB Sep 6th 2012, 03:16 Wed Sep 5, 2012 11:16pm EDT * Markets count down to ECB crisis-fighting measures * Euro stays firm after powering higher * ECB seen waiving seniority on bonds it would buy * Aussie rebounds from 8-week low after local job data By Hideyuki Sano TOKYO, Sept 6 (Reuters) - The euro held firm near its two-month peak in Asia on Thursday, having rallied sharply the previous day on renewed hopes that the European Central Bank may employ new tactics to counter the region's perennial debt crisis. All eyes are now on the ECB's policy announcement at 1145 GMT and President Mario Draghi's news conference at 1230 GMT, as market players looked for details of the bank's new bond buying programme. The single currency powered to a high of $1.2621, within easy reach of the two-month high around $1.2638 set on Aug. 31, having recovered nearly five percent from its July 24 low of $1.2042. A break there could pave the way for a retest of $1.2765/75, a level representing the 50 percent retracement of its February to July drop, though some market players are cautious about the chance of disappointment. "I'm not sure if the ECB measures alone can boost the euro further from here. What's ultimately important is fiscal convergence," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank. The euro's jump on Wednesday came as a string of leaks from euro zone officials provided markets with more confidence that ECB President Mario Draghi will try to back up his pledge to do "whatever it takes" to save the euro. The European Central Bank is ready to waive seniority status on government bonds it buys under a new programme which it is set to agree at Thursday's Governing Council meeting, central bank sources told Reuters on Wednesday. Bloomberg also reported on Wednesday that the ECB may buy an unlimited amount of government bonds, though sources told Reuters report, however, said unlimited buying is unlikely as the central bank wanted to have some room for manoeuvre. Sebastien Galy, a strategist at Societe General, said if the euro extended its rise towards $1.2765, he would then target a fall back towards $1.21. "There are a lot of happy thoughts priced into the market and starting to build some long USD positions might well make sense for a tactical correction in global risk," he said. The rally in the euro saw the dollar index retreat to 81.782, near a 3-1/2 month trough of 80.964 plumbed on Friday. Against the yen, the greenback was at 78.42, down a touch from Wednesday's high of 78.54 but still within its familiar range around 78.50 yen. The Australian dollar bounced back from fresh eight-week low on a wave of short-covering after a surprise fall in Australian jobless rate, though other figures pointed to a soft labour market. The Aussie was at $1.0210, having plumbed a near low around $1.0165. Since reaching a high of $1.0615 in early August, the Aussie has shed more than 4 U.S. cents as markets grew more bearish about China, Australia's most valuable export market. Even the Reserve Bank of Australia (RBA) recently sounded less confident about the outlook for China, prompting the market to price in a bigger chance of a rate cut as soon as next month. Link this Share this Digg this Email Reprints

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