The euro rose to a three-week peak against the dollar today after a wave of short-covering triggered by a report saying Germany could make concessions on efforts to put together a bailout for Greece, with traders eyeing $1.45 as its next target.
Germany is considering dropping its push for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans for Greece, the Wall Street Journal reported, citing people familiar with the matter.
"The euro zone problems appear to be subsiding for now. Or putting it another way, the market appears to have stopped looking at them as a factor for now," said Teppei Ino, a currency analyst at Bank of Tokyo-Mitsubishi UFJ, adding that the market could now focus on the heavy schedule for US data releases this week.
The euro rose as high as $1.4407, its highest in three weeks, piercing its 55-day moving average of $1.4334 and also $1.4373, the top of the Ichimoku cloud on the daily chart.
The European Union is racing to draft a second bailout package for Greece to release vital loans next month and avert the risk of it defaulting, EU officials said yesterday.
Jean-Claude Juncker, the chairman of euro zone finance ministers, said he was optimistic after discussing further aid for Athens with French President Nicolas Sarkozy in Paris.
Moves to plug a looming funding gap for 2012 and 2013 accelerated after the International Monetary Fund said last week it will withhold the next tranche of aid due on June 29th unless the EU guarantees to meet Athens' funding needs for next year.
The dollar's index against a basket of currencies fell to its lowest level in three weeks, losing 0.5 per cent to 74.568, having broken below support on the Ichimoku cloud bottom at 74.89.
The dollar has been hurt by a recent batch of disappointing US data, with many traders thinking that important numbers this week, such as ISM manufacturing and payroll data, could cement the view that the US recovery may remain slow for now.
"The dollar came under pressure ahead of US jobs data and manufacturing figures due this week. Macro funds are offloading positions in the dollar as they expect slightly weaker figures after a bout of weak data earlier this month," said Koji Fukaya, chief currency analyst at Credit Suisse in Tokyo.
The dollar also fell 0.2 per cent against the Swiss franc to 0.85 franc, a stone's throw from a record low of 0.8457 hit while the pound rose 0.4 per cent to $1.6543, its highest in four weeks.
The Australian dollar also gained 0.23 per cent to $1.0713, quickly recovering from small losses posted after weaker-than-expected Australian export data.
The New Zealand dollar did even better, jumping 1.0 per cent to as high as $0.8264, a fresh post-float high.
The yen failed to benefit from overall dollar weakness, slipping after Moody's said it had placed its rating on Japan under review for possible downgrade, less than a week after rival rating firm Fitch cut its outlook on Japan's debt.
The dollar gained 0.36 per cent to 81.23 yen, while the euro jumped more than 1.3 per cent to 116.88 yen, its highest since May 20th.
The euro moved from near its support at its 100-day moving average at 115.32 yen to 116.77 yen, zeroing in on immediate resistance at its 55-day moving average at 117.43 yen. The yen also dropped 0.8 per cent against sterling.
Reuters
