The euro advanced to a one-week high against the dollar on Thursday as strong commodity prices and a report that China is interested in buying "bailout bonds" for Portugal spurred active stop-loss buying of the single currency.
The market saw sizeable stop-loss euro purchases at $1.4120 and $1.4150, encouraged by a Financial Times article quoting the chief executive of the European Financial Stability Facility as saying China was "clearly interested" in buying bonds for the Portugal bailout to be issued in mid-June.
The euro could revisit $1.42, but lingering uncertainty over debt problems in Greece and other eurozone countries was expected to limit strong follow-through moves. The euro was up 0.5 percent at $1.4164 after reaching a session peak of $1.4173, its the highest since May 20.
The euro gained support the previous day after Finland approved an EU/IMF bailout for Portugal, while demand from hedge funds also prompted a squeeze in euro short positions. The euro was refreshed by finding support at a series of technical points below $1.4000, including the 100-day moving average, now at $1.3997, and another support seen near $1.3968, a two-month low struck earlier this week. Below that point, $1.3770 was seen as important as it is a 38.2 percent Fibonacci retracement of the euro's rise from June 2010 to May 2011.
The Aussie fell 0.8 pct to around NZ$1.3110 from a high of NZ$1.3213 after traders cited New Zealand website "Interest.co.nz", which reported on China's potential interest in buying NZ$6 billion worth of New Zealand assets. Meanwhile, the safe-haven Swiss franc backed off from record high levels against the euro as risk-averse investors' follow-through moves were limited, traders said.
The euro was trading up 0.3 percent at 1.2326 Swiss francs after hitting a record low of 1.2270 francs the previous day. The dollar drifted down against the yen as general strength in oil prices prompted dealers to unwind their dollar-long positions ahead a three-day weekend in the United States and in European markets. A series of stop-loss orders triggered below 81.80 yen swallowed up a slew of buy orders from Japanese retail investors, which were lined up at 81.70-81.90 yen, traders said. The greenback was trading down 0.3 percent at 81.75 yen.