Forex News

Aussie, kiwi hit all-time highs vs euro post-ECB

03 August, 2012 - Reuters

SYDNEY/WELLINGTON, Aug 3 (Reuters) - The Australian and New Zealand dollars hit all-time highs versus the euro on Friday as failure by the European Central Bank to launch immediate measures to help debt-stricken countries prompted investors to dump the single currency.

  • Euro slumps to around A$1.1600 according to Reuters data, plumbing its weakest since the single currency was launched in 1999. Against the kiwi, it falls to NZ$1.4980, also a lifetime low.
  • Single currency falls broadly, tumbles to a one-week low versus the safe-haven U.S. dollar.
  • Despite their gains versus the euro, Aussie and kiwi sell off versus the U.S. dollar after the ECB disappointed hopes for immediate action, though ECB chief Draghi did lay the groundwork for a resumption of bond buying .
  • Aussie pulls back to $1.0455, reversing a jump to a 4-1/2-month high of $1.0581 in the lead up to Draghi's press conference.
  • Kiwi trades at $0.8098, not far from a session trough of $0.8070 hit after Draghi's comments. It retreated from $0.8172 hit in earlier trade, its highest since early May.
  • Both currencies suffer against the yen
  • , also considered to be a safe-haven. Aussie retreats from three-month high hit in offshore trade.

  • At its post-meeting press conference, the ECB indicated it may resume buying government bonds to reduce sky-high borrowing costs in Italy and Spain, but President Mario Draghi indicated that such intervention would not come before September.
  • This disappointed investors who had bet the ECB would announce bold moves to help solve the euro zone debt crisis, which had boosted the euro, the Antipodeans and other higher-risk currencies in the past week.
  • Analysts expect Aussie, kiwi will stay on the back foot, given their sharp climbs on high expectations for monetary stimulus from the ECB, Fed this week, but some said aggressive follow-through selling may be limited.
  • "The ECB disappointment should weigh on the currencies during the days ahead, although there was enough in the statement and comments to prevent a worst-case-scenario selloff," Westpac analysts say in a note.
  • With the ECB out of the way and no major economic data or events due in Australia or New Zealand, investors focus on U.S. non-farm payrolls due later on Friday.
  • Expectations are for 100,000 new jobs to have been added to the U.S. economy in July. A weaker number could crank up risk aversion, but it would also stoke expectations for more QE from the Federal Reserve.
  • Aussie, kiwi on track to end the week little changed versus the U.S. dollar, holding up better than the euro, which has lost nearly 1 percent so far this week.
  • A weekly close for the Aussie around current levels may be a bullish sign for the currency, given it is likely to make a clean break above $1.0317, its 55-weekly moving average.
  • Technical resistance seen around $1.0470-1.0490 where a slew of hourly averages lie.
  • Traders say the kiwi will face offers to sell above $0.8100. Still, strong support seen at $0.8083, the 61.8 percent retracement of its February-June selloff.
  • Australian government bonds rise, tracking a jump in U.S. Treasures after the ECB announcement. The three-year contract

    indicated 0.110 points higher at 97.510, while the 10-year contract rises 0.100 point to 97.040.

  • New Zealand government bonds also rally, pushing yields as much as 10 basis points lower across the curve.

    (Australia and New Zealand bureaux)

    Copyright Thomson Reuters 2012. All rights reserved.

    The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

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