LONDON—Relieved traders pushed the euro and other currencies correlated to risk-taking to seven-week highs against the dollar Thursday after European leaders managed to thrash out an 11th-hour deal on Greek debt and bank recapitalization.
The euro traded as high as $1.4038 against the dollar at the start of the European session while the Australian dollar broke back above $1.06 for the first time since Sept. 9. Indeed, the Aussie dollar was notching up gains against the dollar even faster than the euro's could, indicating that this is a broad-based relief rally.
The lack of details was of little importance during the initial trading hours, as analysts said the fact that any deal at all had been struck was sufficient to alleviate traders' worst fears.
"European policy makers have bought themselves time and people don't like the dollar," said Neil Mellor, currency strategist at the Bank of New York Mellon in London. "Dollar weakness is the name of the game at the moment. People want to sell dollars, that's the principal guiding factor in the market."
The yen inched higher on the back of the dollar's weakness despite Japanese Finance Minister Jun Azumi reiterating his concern about speculative yen moves. Mr. Mellor said that the finance minister's jawboning was way past its shelf life and the fall in the dollar against the yen was "clearly testimony to how weak sentiment is about the dollar right now."
Currencies from eastern Europe also broadly benefited from the improvement in market sentiment, with the notable exception of the Hungarian forint, which is trading near its weakest level against the euro since early April 2009 on fears of a sovereign downgrade. The euro traded as high as 302.17 forints.
Hungary rejected all bids at a 12-month Treasury bill auction after comments from Hungarian Economy Minister Gyorgy Matolcsy that Hungary's sovereign rating may be downgraded.
Meanwhile, the Swedish Riksbank kept its benchmark interest rate unchanged at 2% as expected but also revised its interest-rate forecasts lower for the next few years. But currency strategists said the Riksbank wasn't as cautious as it could have been, which helped to underpin the Swedish krona's rise against the euro.
Looking into the session ahead, traders will be focusing on the advance estimate of third-quarter U.S. GDP, which is due out at 8:30 a.m. EDT. The consensus is for the world's largest economy to grow 2.7% on the quarter, well above the 1.3% growth rate in the three months to June.
The euro was recently trading at $1.4020, compared with $1.3906 late Wednesday in New York. The dollar was at ¥75.78, compared with ¥76.16, while the euro was at ¥106.25 compared with ¥105.98. Meanwhile, the pound was trading at $1.6210 against the dollar, compared with $1.5975 late Wednesday in New York.
The ICE Dollar Index, which tracks the greenback against a basket of currencies, was at 75.644 compared with 76.209 late Wednesday in New York.
