The Australian dollar climbed towards a seven-month high on Wednesday, helped by a weaker US dollar which fell out of favour as risk appetite improved and on talk the United States risked a credit rating downgrade. The Aussie was firm at $0.7683, up from $0.7599 seen here late Tuesday. It also held its ground against the yen at 74.16 yen, from Tuesday's 73.91.
The US dollar hit a four-month low against a basket of currencies after an opinion story in the Financial Times touched on the risk of the United States losing its triple A status, traders said. "It does feel as if forex traders are shifting from being slaves to the S&P ticker towards hating the US dollar again," said Robert Rennie, a strategist at Westpac. "You can almost hear them chanting 'We hate dollars...We hate dollars,'" he said.
Philip Burke, the chief currency dealer at J.P. Morgan, said investors were betting the Aussie could rise further, with traders putting stop losses at $0.7580. Those who are shorting the Aussie, or betting that it would fall, have stop losses at around $0.7720, Burke said.
There was demand from hedge funds on dips, he added. "They are saying the recovery is on and we can't afford to miss out anymore." On the charts, the next key Fibonacci level is around $0.7929, which will be a 50 percent retracement of the Aussie's plunge from July to October. The seven-month peak of $0.7714 was hit on May 11.