Euro jumps

The euro leapt to its highest in nearly a month on Monday, surging 1 percent on the dollar and yen as investors who had sold it scrambled to buy it back after euro zone finance ministers agreed a rescue package for Greece. The euro's rise weighed broadly on the dollar, helping the pound climb to its highest in seven weeks, while the dollar index plunged through its 30- and 55-day daily moving averages.
Euro zone finance ministers approved a 30 billion euro ($40.5 billion) aid package of loans for Greece if needed, with at least 10 billion euros also expected from the International Monetary Fund, a move likely to calm markets in the short term. The massive financial safety net for Greece boosted investor appetite for riskier assets, helping the Australian dollar to its highest in five months and the New Zealand dollar to its strongest since late January earlier in the day.
The euro extended gains as far as $1.3692 on trading platform EBS, up from $1.3488 in New York on Friday. It moved above its Asian morning high of $1.3678 after making a brief pullback to test support at its 55-day moving average at $1.3630. The euro, which hit a 10-month low at $1.3267 in March, is now seen as having potential to test a mid-March high near $1.3820 this week.
The agreement on a package for Greece was likely to help the country raise funds more easily but the problem was unlikely to disappear, said Robert Rennie, chief currency strategist at Westpac, Sydney. "The way the market is short euro, this could give a leg up to around the next technical resistance at $1.3820. But can it sustain a move higher than that? I am not sure. We may see some selling emerge around there."
Greece will test market appetite for its debt with an auction of 1.2 billion euro Treasury bills on Tuesday after investors recently dumped Greek assets on mounting worries about the country's debt crisis. Traders and analysts said the auction results will be important for the euro as well as other risky assets. Scepticism about how Greece would resolve its debt problems has seen short positions stack up against the euro this year.
Data from the Commodity Futures Trading Commission shows currency speculators were still heavily short the euro in the week ended April 6, although they reduced their net short position to 67,223 contracts from a record 85,326 contracts the week before. Andrew Robinson, FX market strategist at Saxo Bank in Singapore, said the euro may get squeezed higher again in European trade. "Consolidation might take us just below $1.3600 but I see more upside for the rest of the week," he said.
The single currency rose 1.2 percent to 127.32 yen above its 100-day moving average at 127.14 yen, although it was still below a peak seen early in the month at 127.95. Its gain underpinned broad risk appetite and pushed up commodity-linked currencies such as the Aussie and the kiwi. The Aussie rose to its highest since mid-November at $0.9389, before coming back to $0.9330, flat on the day, with its November peak of $0.9407 now in the market's sights.
The kiwi rose to $0.7195, its highest level since late January, before relinquishing some ground to $0.7160. The dollar index fell more than 1 percent to 80.22, breaking down through an upward trendline in place since early December and plunging through its 55-day daily moving average at 80.42. Sterling earlier lost ground against the euro, but it later rose against the dollar as high as $1.5486, its highest since February 23.
The CFTC data shows currency speculators trimmed their long bets on the US dollar in the week to April 6. Against the yen, the dollar was unchanged at 93.14 yen, off a seven-month high near 95 yen set early this month. Asian currencies, including the yen, are seen as likely to gain from any move by China to revalue its currency.
Chinese President Hu Jintao visits Washington this week for a nuclear security summit and is expected to hold a one-on-one meeting with US President Barack Obama on Monday. The currency market is watching closely for signs of how soon China might relax its grip on the yuan. The country recorded its first monthly trade deficit in six years in March, although economists doubt that will stand in the way of a resumption in the yuan's rise before long.