CNBC: Euro Gains as China, Kuwait Keep EU Holdings
China said Europe remains a key investment market for its massive currency reserves, while the Kuwait investment Authority affirmed it is a long-term investor in Europe.
Analysts said comments from China and Kuwait that knocked down earlier reports provided an opportunity for investors to cover short positions in the euro, which has taken a beating the last few months.
"The China and Kuwait news today certainly helped the euro especially in the context of an oversold market," said David Watt, senior currency strategist, at RBC Capital Markets in Toronto.
"The fact that they came out with a statement today suggesting they're not going to sell the euro doesn't mean that they're not concerned. But they're looking at the euro from a long-term perspective and the base-case scenario is that the euro zone is not going to crack."
In early New York trading, the euro [EUR=X 1.2204 0.005 (+0.41%) ] traded higher on the day versus the dollar, having climbed as high as $1.2343, according to EBS data.
Traders said short-covering in thin conditions ahead of market holidays in Britain and the United States on Monday had aggravated the moves.
The euro offered little reaction to the Spanish parliament's approval of a 15 billion euro austerity package on Thursday. Analysts said this was due to doubts about whether Spain will be able to implement the measures.
Gains in the euro versus the greenback, however, were capped by data showing initial U.S. jobless claims fell in the latest week, suggesting the labor market is on a steady path to recovery.
A report indicating the U.S. economy grew at a slower pace in the first quarter than previously estimated did little to harm sentiment on the dollar given that consumer spending, which accounts for 70 percent of the U.S. economy held up well, rising 3.5 percent.
"The numbers are slightly shy of hopes, but they show that the U.S. economy is in recovery, which matches the data we recently saw on the housing market," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.
A rise in European shares due to a short-covering rally helped support the euro, with higher-risk currencies gaining as equity and commodity pries climbed.
The euro [EURJPY=X 110.68 1.47 (+1.35%) ] rallied against the yen, pulling away from an 8-1/2 year low of 108.83 yen hit this week as gains in risky assets stung the low-yielding yen.
The dollar [JPY=X 90.65 0.81 (+0.9%) ] rose versus the yen.
The high-yielding Australian dollar rose more than 2 percent against its U.S. counterpart [AUD=X 0.8389 0.0175 (+2.13%) ] and 3 percent versus the yen [AUDJPY=X 76.06 2.27 (+3.08%) ] .
