Reuters: US Dollar Report: FOREX-Euro resilient on ECB hopes, Aussie eyes RBA

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FOREX-Euro resilient on ECB hopes, Aussie eyes RBA Sep 3rd 2012, 23:20 Mon Sep 3, 2012 7:20pm EDT * Moody's changes outlook for EU's Aaa rating to negative * Euro little moved, hopes high for ECB action this week * Aussie dlr languishes at 5-week lows, RBA eyed By Ian Chua SYDNEY, Sept 4 (Reuters) - The euro held its ground on Tuesday even after Moody's changed to negative its outlook for the European Union, with hopes running high the ECB will unveil a plan tackle the region's debt crisis later this week. The single currency fetched $1.2584, versus $1.2571 late in European trade on Monday. U.S. markets were shut for a public holiday. The euro remained within easy reach of an eight-week peak around $1.2638 set Friday. Moody's changed its outlook on the Aaa rating of the European Union to negative, warning it might downgrade the bloc if it decides to cut the ratings on the EU's four biggest budget backers: Germany, France, UK and Netherlands. Traders said the news from Moody's was not a major surprise and speculation was intense the ECB will on Thursday announce details of a long awaited debt-buying scheme to help ease funding pressures for stressed states. Those hopes were given a boost on Monday after ECB President Mario Draghi was reported as saying purchases of sovereign bonds of up to three years maturity by the ECB did not constitute state aid. Shorter-dated Italian yields dropped to their lowest since April as a result, with Spanish counterparts also extending falls. But with so much hope already priced in, analysts warned the market might react negatively if the ECB failed to meet expectations. "The risk of the ECB disappointing market expectations on the debt purchases front remains high, with risks to the euro to the downside," analysts at Barclays Capital wrote in a note. The euro hovered near a two-month high against the Australian dollar at A$1.2307, but was little changed on the yen at 98.52. The resilience in the single currency saw the dollar index wallow near a 3-1/2 month trough of 80.964. Versus the yen, the greenback edged up to 78.31, pulling away from Monday's low around 78.19. Investors continued to give the Australian dollar a cold shoulder after an unexpected fall in domestic retail sales weighed on a market already fretting about the slowdown in China, Australia's single biggest export market. The Aussie fell to a fresh five-week low around $1.0233 before recovering a bit of ground to last stand at $1.0244. Immediate support is seen at $1.0220, the 38.2 percent retracement of its June-August rally. The Reserve Bank of Australia meets later in the day but is widely expected to keep interest rates unchanged. RBA Governor Glenn Stevens has repeatedly said the effects of past rate cuts are yet to be felt, suggesting he is in no hurry to act again. "The AUD has underperformed in recent days as Chinese growth concerns have continued to dominate, but the currency could get a reprieve should today's RBA statement come in as neutral as was seen at the last meeting," said Kiran Kowshik, strategist at BNP Paribas. Link this Share this Digg this Email Reprints

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