Monday, November 29, 1999

Euro hits 2-week high against dollar

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The euro briefly hit a two-week high on Wednesday, aided by improved risk tolerance after a strong rally in U.S. equities, though the move lacked momentum required to tackle nearby resistance.The single currency made a show above Tuesday's two-week peak at $1.2350, with traders and technical analysts suggesting it had scope to extend gains after a strong rally in the S&P 500 illustrated improving risk sentiment in global markets.At 0718 GMT, the euro had steadied to trade flat on the day at $1.2325 from its earlier high of $1.2355."The euro's recent rally can continue. It's been tracking the improvement in risk and the higher-yielding currencies, but for now there's nothing to provide much of an impetus to take it significantly higher," said Stuart Bennett, senior FX strategist at Credit Agricole CIB.He added a daily close above $1.2350 on Wednesday would be a sign that the recent rally, which had cleared out some stale short positions, could go further.Technical analysts were increasingly positive on the outlook for the single currency."We look for the correction higher to extend to $1.2445/1.2570 - the 2009 low and the 38.2 percent retracement of the move down from April," analysts at Commerzbank said.On Tuesday, investors set aside concerns about the euro zone financial sector and soft economic data to buy riskier assets, higher-yielding currencies and the euro, looking on the bright side after Spain raised 5.2 billion euros at a debt auction and Belgium netted 2.5 billion euros.EQUITIES IN FOCUSHigher-yielding currencies were in focus on Wednesday after the broad rally in equities spurred appetite for riskier assets."Markets are focusing more on equity markets so equity-sensitive currencies like the Aussie, kiwi, Canadian dollar and the Swedish crown could be the main focus," said Masafumi Yamamoto, chief FX strategist at Barclays in Japan.The Australian dollar held near the month's highs against both the dollar and the yen but failing to capitalise on gains of 1 percent in Asian shares.It was flat on the day at $0.8637, not far below a one-month high near $0.8670 struck on Monday.The Aussie was steady at 79.05 yen, pausing ahead of resistance at 80.00, a 50 percent retracement of its fall from just above 88.00 in late April to its May low of 71.89.The New Zealand dollar fell 0.6 percent to $0.6950, with traders saying a comment by Finance Minister Bill English on trying to ensure the rate hike cycle was not as vicious as in the past was weighing on the currency.It also lost ground to the Aussie, which rose sharply to its highest in two weeks against the kiwi.The euro was up around 0.4 percent versus the yen at 113.10 yen, as the Japanese currency weakened. The dollar was slightly stronger at 91.68 yen, in the middle of a four yen range it has held since mid-May.The dollar index was little moved at 85.996, hovering above support near 85.85 which was a low it marked on May 28But it slipped to its lowest in a month against the Swiss franc at 1.1277 francs. The franc also strengthened versus the euro, with Thursday's SNB policy meeting looming.

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