WORLD FOREX: Euro Hits Multi-month Highs Vs Dollar, Pound, Yen

Friday, Feb 24, 2012

-- Euro trades at multi-month highs against pound, dollar and yen

-- Liquidity, growth hopes plus Greek progress helping to underpin gains

-- Emerging market currencies also firm


 
   By Eva Szalay 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--The euro rose to multi-month highs against the dollar, yen and pound in European hours Friday as currency traders looked ahead positively to next week's promise of more liquidity from the European Central Bank, encouraged by the progress made in Greece and by tentative signs of global economic improvement.

The single currency rose to its highest level against dollar since Dec. 9, pushing above $1.34. It also rose above JPY108 against the yen for the first time since Nov. 7 and briefly popped above GBP0.85 against sterling.

In keeping with the more constructive tone, calmer markets are now being anticipated by derivative markets for the foreseeable future. The extent to which the euro is expected to move against the dollar in the next year has now fallen to levels not seen since April 2010, according to options pricing.

But some analysts warned against complacency, arguing that the Greek crisis would linger on, even as the country launched its bond-swap offer to private creditors as part of a broader debt restructuring and bailout. Some also highlighted the potential for an oil-shock as tensions with Iran built.

"The last thing the global economy needs right now is a supply shock that drives crude sharply higher," Chris Turner, a currency strategist at ING Bank NV, said in a note to clients. But he added that abundant liquidity and improving global growth prospects were supporting investor confidence for now.

The ECB will hold a second round of long-term refinancing operations on Wednesday and that is making investors more willing to put more capital to work by snapping up equities and betting on relatively riskier currencies like the euro and Australian dollar, analysts said.

"The world is a dangerous place, but central bank largesse and the absence of recession are good for high-yielding currencies, equities and commodities," analysts at Societe Generale said in a research note.

Speculative market players are also still heavily positioned for a leg lower in the euro, so the generally better tone in markets is forcing them to unwind of some of these plays and in turn helping to extend the single currency's gains.

The euro though was unable to hold above 0.85 against sterling after data showed the U.K. economy shrank 0.2% in the last quarter of 2011, as expected.

Emerging market currencies traded in tandem with the euro, holding onto gains.

At 1137 GMT the euro was trading at $1.3414 compared to $1.3370 late Thursday in New York, according to EBS via CQG. The currency was at Y108.02 from Y106.94 and at CHF1.2049 compared to CHF1.2053.

The dollar traded at Y80.52 compared to Y80.00 and at CHF0.8982 compared to CHF0.9015. The pound was at $1.5802 compared to $1.5742.

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 78.495 from 78.645.

A summary of key levels for chart-watching technical strategists is below:


 
Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 
 
Spot 1136 GMT     1.3416     80.53      1.5814     0.8981 
3 Day Trend       Bullish    Bullish    Range      Bearish 
Weekly Trend      Bullish    Bullish    Range      Bearish 
200 day ma        1.3511     78.43      1.5812     0.9061 
3rd Resistance    1.3550     81.00      1.5927     0.9113 
2nd Resistance    1.3475     80.94      1.5878     0.9085 
1st Resistance    1.3435     80.71      1.5819     0.9027 
Pivot*            1.3328     80.07      1.5713     0.9046 
1st Support       1.3384     80.38      1.5722     0.8954 
2nd Support       1.3357     80.25      1.5682     0.8900 
3rd Support       1.3293     80.00      1.5645     0.8810 
 
 
Forex spot:       EUR/JPY 
 
Spot 1136 GMT     108.03 
3 Day Trend       Bullish 
Weekly Trend      Bullish 
200 day ma        105.99 
3rd Resistance    109.22 
2nd Resistance    108.95 
1st Resistance    108.30 
Pivot*            106.71 
1st Support       107.66 
2nd Support       107.50 
3rd Support       107.00