Aussie rout continues, falls to new 8-month low vs. U.S. dollar
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar was modestly higher versus most major rivals Thursday, with the euro losing ground after a key euro-zone finance minister appeared to downplay expectations of any effort to buoy up the single currency.
The euro (CUR_EURUSD 1.2327, -0.0099, -0.7967%) slipped to $1.2333 from $1.2429 in late North American trading Wednesday. Against the yen, the euro (CUR_EURYEN 112.1300, -2.6200, -2.2832%) was at ¥112.88, down from ¥113.81 late Wednesday.
The dollar index (DXY 86.71, +0.32, +0.37%) , which tracks the U.S. unit against a trade-weighted basket of six major currencies, rose to 86.610 from 86.094 late Wednesday.
Eurogroup Chairman Jean-Claude Juncker told reporters in Tokyo Thursday that he was concerned about the euro's recent rapid drop, but steps to defend the currency weren't needed.
"I'm really concerned about the rapid (pace) of the fall of the exchange rate," he told reporters at the Japanese Ministry of Finance following a one-on-one meeting with Finance Minister Naoto Kan, according to Dow Jones Newswires.
However, "I don't think that this is a matter (requiring) immediate action," said Juncker, who chairs meetings of finance ministers from the 16 nations that share the euro.
The euro had rebounded sharply versus the U.S. dollar on Wednesday after earlier hitting a fresh four-year low in the wake of Germany's decision to impose a ban on short sales of euro-zone government bonds, credit default swaps and some financial stocks.
Rumors of imminent intervention by the European Central Bank and other central banks Wednesday were credited with triggering a short-covering rally that saw the euro bounce as much as three cents against the greenback.
But strategists noted that the ECB has been reluctant to engage in intervention over the course of its history. The sharp rebound Wednesday may have been more reflective of record short positions against the euro and heavily oversold technical conditions, they argued.
"Intervention fears and talk that Greece may leave the EMU offset the negative impact of the German short-selling ban" on Wednesday, wrote strategists at UniCredit Bank in Milan. "Investors wanted a reason to take profit and got it. But weak stocks and crashing commodity currencies suggest that euro gains should prove short-lived again."
The Australian dollar (CUR_AUDUSD 0.8273, -0.0223, -2.6248%) , one of the most high-profile commodity currencies, was hammered again Thursday, cropping 2% versus the U.S. unit to change hands at 82.44 U.S. cents after marking another new nine-month low.
The Aussie tumbled 3.6% versus the Japanese yen to change hands at ¥74.78.
Against the U.S. dollar, the Australian currency "has now fallen more than 550 points this week -- a remarkable decline given the fact that Australia still enjoys some of the best fundamentals in the G-20 block," said Boris Schlossberg, director of currency research at GFT. "Nevertheless, as we noted earlier, the Aussie is plagued by three concerns: decline in commodities, slowdown in China and the possible end of the tightening cycle" by the Reserve Bank of Australia.
Schlossberg reckons the plunge prices the Aussie for a double dip recession. Unless evidence emerges to support that scenario, the Aussie should be able to find support near 80 U.S. cents with the potential for rally back toward the 85-to-87-cent range if capital market turmoil calms down in the summer months, he argued.
The British pound (CUR_GBPUSD 1.4272, -0.0185, -1.2796%) fell 0.9% versus the dollar to $1.4280. The pound found a little bit of support on a 0.3% monthly rise in April U.K. retail sales, which was largely in line with forecasts. Read about the retail sales data.
Worries about Britain's fiscal situation continue to plague the pound ahead of the new government's plan to unveil an emergency budget on June 22, said Jane Foley, research director at Forex.com.
From a technical perspective, the pound on Wednesday had been on track to breach the lower boundary of the descending channel that has been in place since the November last year, wrote strategists at BNP Paribas. Trendline support versus the dollar is seen at $1.4260.
A sustained break below that level would open a target for $1.4110 initially, with potential for a medium-term test of the $1.35 area, they wrote.
Against the Japanese currency, the dollar (CUR_USDYEN 90.8000, -1.0000, -1.0896%) was at ¥90.69, compared with ¥91.71 late Wednesday.
