Euro holds gain after rally on Greece optimism; Aussie dollar weakens further

A man looking at monitors inside the Athens stock exchange on Feb 3, 2015. The euro remained higher after jumping 1.2 per cent on Tuesday as Greece's government was said to retreat from a demand for a debt writedown, boosting optimism the region won'
A man looking at monitors inside the Athens stock exchange on Feb 3, 2015. The euro remained higher after jumping 1.2 per cent on Tuesday as Greece's government was said to retreat from a demand for a debt writedown, boosting optimism the region won't face a renewed crisis. -- PHOTO: REUTERS

(Bloomberg) - The euro remained higher after jumping 1.2 per cent Tuesday as Greece's government was said to retreat from a demand for a debt writedown, boosting optimism the region won't face a renewed crisis.

The 19-nation currency advanced versus most of its major peers on Tuesday after Greece's Finance Minister Yanis Varoufakis outlined plans to swap some Greek debt owned by the European Central Bank and the European Financial Stability Facility for different securities. Australia's dollar dropped as Goldman Sachs cut its forecast for the currency after the Reserve Bank lowered interest rates to a record on Tuesday.

"The tone of the political comments from both the Greek and euro-area leaders has become a bit more agreeable and less confrontational," Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., said in a phone interview from New York. "Partly this is a market-driven, technically inspired move."

The euro traded at US$1.1465 as of 8:53 a.m. in Tokyo from US$1.1481 in New York Tuesday, when it had the biggest intraday rally since Oct. 15. The single currency was little changed at 134.92 yen. The dollar bought 117.68 yen from 117.57.

The euro has slumped about 15 per cent over the past six months as the ECB embarked on a government-bond buying program this year to combat growing risks of deflation and a slowing economy. Since dropping to the lowest since 2003 on Jan. 26, the currency has rebounded as trading patterns show the currency may have dropped too much, too fast.

"We're not bullish, we just think it stabilizes," Atul Lele, the chief investment officer of Deltec International Group, who manages $1.9 billion, said in an interview in New York. "We're still negative on the euro."

ECB President Mario Draghi surprised investors in January with a 1.1 trillion euro bond-purchase plan that was twice as big as forecast. ECB Executive Board member Benoit Coeure said this week the bond-buying program is "open ended." Strategists in a Bloomberg survey forecast the euro will drop to US$1.10 by the end of the year, while a growing minority of banks, including Barclays, Goldman and Citigroup, are calling for the euro to fall to parity with the dollar.

Australia's dollar declined for a second day against the greenback after Goldman cut its 12-month forecast for the currency to 72 U.S. cents from 75.

The Aussie fell 0.2 per cent to 77.75 cents, after dropping on Tuesday to 76.26, the least since May 2009.

A rally in commodity including industrial metals and crude oil helped the currency stem a slide that accelerated on Tuesday after the Reserve Bank of Australia cut its benchmark rate to a record 2.25 percent.