Swedish krona, Thai baht gain in wake of anticipated rate hikes
By William L. Watts and V. Phani Kumar, MarketWatch
LONDON (MarketWatch) — Risk appetite appeared decidedly on the rise Wednesday, sending the U.S. dollar tumbling, contributing to strong gains for the euro and fueling a push to a post-float high for the risk-sensitive Australian dollar.
Adam Cole, global head of foreign-exchange strategy at RBC Capital Markets, said the rise in risk appetite was spurred by strong earnings after Tuesday’s U.S. closing bell by tech giants IBM IBM -1.10% and Intel Corp. INTC +6.09% , which in turn boosted U.S. stock index futures and European equity markets. Read Indications column on U.S. stock index futures.
The U.S. dollar index DXY -0.86% , which measures the greenback’s movements against a basket of six major currencies, dropped back below the 75-level, to trade at 74.352, down from 75.038 in late North American trade on Tuesday. The index is down 5.9% so far in 2011.
Euro soars
The euro EURUSD +1.2905% traded at $1.4524, up from $1.4339 in late North American trading. The euro set a new 15-month high at $1.4547, more than reversing the loss attributed earlier this week to fears of a potential restructuring of Greek sovereign debt.
The euro EURYEN +1.4527% rose 1.3% versus the Japanese yen to change hands at ¥120.20.
An auction of 10- and 13-year bonds by the Spanish Treasury saw yields rise, but was met by strong demand. The yield on the 10-year bond rose to 5.472% from 5.162% in a previous auction in March, while the 13-year bond sale produced an average yield of 5.667%, up from 4.248% in a November 2009 sale of the same issue.
Risk appetite was buoyed as the yield on the 10-year bond remained below the 5.5% barrier, said Boris Schlossberg, director of currency research at GFT, in emailed comments.
Australian dollar also gains
The Australian dollar, meanwhile, broke through $1.06 versus the U.S. unit to trade as high as $1.0687, according to FactSet Research data, its highest level since the currency was allowed to float freely in the early 1980s. The commodity-oriented Aussie AUDUSD +1.3108% changed hands at $1.0671 in recent action.
“Both domestic and international developments have propelled the Australian currency higher — gold and silver prices have surged once more, U.S. corporate earnings results are mostly beating expectations, and traders are again investing heavily in the carry trade to the detriment of the Japanese yen,” said Michael Derks, chief strategist at FxPro.
The Swedish krona USDSEK -1.3951% jumped to 6.1181 against the U.S. dollar from 6.2178 the previous day, after Sweden’s central bank delivered a widely expected hike in its key lending rate to 1.75% from 1.5%. Read Market Pulse on Swedish Riksbank's rate move.
The British pound GBPUSD +0.3493% climbed to $1.6369 from $1.6310, but saw upside capped as minutes of the Bank of England’s April 6-7 policy meeting offered little indication rate-hike advocates will prevail at next month’s policy meeting, analysts said. Read Market Pulse on Bank of England minutes.
The minutes showed the Monetary Policy Committee remained split 6-3 in favor of leaving rates on hold at the April gathering.
The dollar rose against the Japanese currency, which weakened as investors took on more risk after a rebound on Wall Street and one in Japanese equities. The dollar USDYEN +0.1574% was recently fetching 82.76 yen, up from ¥82.45.
Among other Asian currencies, the Thai baht USDTHB -0.4660% held gains after the Bank of Thailand decided, as expected, to deliver its fourth back-to-back interest rate hike. The move lifted the rate by a quarter of a percentage point to 2.75%. The dollar slid to 29.930 baht from 30.02 baht.
