Aussie extends rally to highest level since August
By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar traded slightly lower versus most major rivals on Wednesday, with the euro holding gains as investors continued to await an agreement on a second bailout for Greece.
The dollar index DXY -0.08% , which measures the performance of the U.S. currency against six other units, traded at 78.532, down from 78.552 in late North American trading Tuesday.
The euro EURUSD +0.09% traded at $1.3277 after pressing to a fresh two-month high, up slightly from $1.3256 in late trading on Tuesday, while the British pound GBPUSD -0.01% reached $1.5895, slipping from $1.5901.
Hopes the Greek talks will soon be resolved were boosted after The Wall Street Journal reported that the European Central Bank was willing to exchange its Greek government bond holdings, forgoing at least some profits, in a bid to help further ease the country’s debt burden. Read about the Greek bailout talks.
Greek party leaders are set to meet with Prime Minister Lucas Papademos later Wednesday. The meeting has been twice delayed this week.
“We remain cautiously optimistic, as we have been since the start of the week, that this will be the week for the second memorandum, but we would prefer not to go long euro at these levels — the coalition party leaders may opt for one last round of posturing on what is going to be a deeply unpopular set of new austerity measures, and another delay should see a short-term euro retracement,” said Elsa Lignos, currency strategist at RBC Capital Markets.
“We believe we’ll get there in the end, but the story line resembles a long-running daytime soap. When the deal comes, we should see euro/U.S. dollar testing the 100-day moving average at $1.3335,” Lignos said.
Currency markets have seen “general malaise” as traders await an outcome to the Greek debt talks, said strategists at Credit Agricole.
“The conflicting forces of firming U.S. economic data, on the one hand, and uncertainties in Greece, on the other, have left market participants in a bind,” they said, speaking about the U.S. dollar.
“We look for the U.S. dollar index to consolidate around the 79 level over the short term,” the strategists said.
Against the Japanese yen USDJPY -0.01% , the dollar bought ÂĄ76.98, up from ÂĄ76.79 in late trading on Tuesday.
The Australian dollar AUDUSD +0.21% rose to its highest level since August, changing hands in recent action at $1.0825, up from $1.0799 in late North American trading on Tuesday.
The Australian currency jumped Tuesday after the Reserve Bank of Australia unexpectedly kept its key cash rate on hold at 4.25%. See report on Australian policy decision.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Sarah Turner is MarketWatch's bureau chief in Sydney.
