The Australian dollar extended its slide against the euro and dollar in European dealing hours Wednesday after poor Australian trade data, while the euro strengthened back above $1.29 against the dollar as currency traders shrugged off more signs of European recession and looked ahead to the week's central bank policy meetings.
The euro traded as high as $1.2937, having fallen to as low as $1.2877 at the start of European trading, following purchasing managers' index data that showed the euro zone's services sector contracting again in September. But the figure was slightly better than expected and was followed by data showing a fourth-straight monthly improvement in retail sales.
Overall, trading was a little subdued and analysts speculated whether the euro's move higher could be sustained ahead of the European Central Bank's policy meeting Thursday and Friday's closely watched monthly U.S. employment report.
Despite Spanish Prime Minister Mariano Rajoy's assertion Wednesday that his country wouldn't be asking for financial assistance soon, investors also continued to wonder about the timing of a request.
"Speculation has focused on a bailout request this weekend, just ahead of the Oct. 8 Eurogroup meeting [of euro-zone finance ministers]. In our book it's a fair bet and, if it is not this weekend, we suspect it will not be long afterwards," said Steven Barrow, head of G-10 currency research at Standard Bank in London.
Analysts also cited the unresolved question of Greece, given investor concerns that another bout of debt restructuring might soon be needed.
"This is being largely overlooked by markets but could emerge as a worry during [ECB President Mario] Draghi's press conference and in the run-up to next week's Eurogroup meeting," said Valentin Marinov, currency strategist at Citigroup.
Meanwhile, the Australian dollar traded at its lowest level against the euro since June 14 at 1.2667 Australian dollars. It briefly fell below $1.02 against the U.S. dollar after August data showed the Australian trade deficit ballooned to its widest level in more than four years.
Elsewhere, the market expects the National Bank of Poland to cut rates for the first time since 2009 later Wednesday. The central bank's rate council is widely expected to reverse its May rate increase cut the current 4.75% interest rate to 4.5%.
Looking ahead, the U.S. September ADP employment number, regarded widely as a precursor to nonfarm payrolls, is due at 0815 Eastern time.
The euro was trading at $1.2918 against the dollar Wednesday morning, compared with $1.2920 late Tuesday in New York, according to trading system EBS. The dollar was at ¥78.23 against the yen, compared with ¥78.16, while the euro was at ¥101.08 compared with ¥100.99. Meanwhile, the pound was trading at $1.6118 against the dollar, compared with $1.6235 late Tuesday in New York.
The Wall Street Journal dollar index, which tracks the U.S. dollar against a basket of currencies, was at 69.800 from about 69.740.
