FOREX-Euro perkier, commodity currencies shine

by on September 27, 2012 11:19 pm BST

Thu Sep 27, 2012 7:19pm EDT

* Euro holds gains, commodity currencies sharply higher

* Spain’s budget soothe market jitters for now

* Moody’s review on Spain’s ratings in focus

By Ian Chua

SYDNEY, Sept 28 (Reuters) – The euro held firm on Friday,
while commodity currencies started Asian trade sharply higher as
worries about the euro zone eased somewhat after Spain unveiled
a crisis budget that many saw was a step towards a bailout.

The single currency stood at $1.2911, having bounced
from a two-week low of $1.2828 set on Thursday. Initial
resistance is seen at $1.2960, the 38.2 percent retracement of
its Sept 17-27 slide.

The rebound in the euro knocked the dollar index to
79.556, off a two-week peak of 80.012 set this week.

Beset by anti-austerity protests and threats of secession by
the wealthy northwestern region of Catalonia, Spain also
announced a timetable for economic reforms that EU Economic and
Monetary Affairs Commissioner Olli Rehn says goes beyond what
the European Commission required.

All this is widely seen as paving the way for eventually
seeking a bailout. Madrid is talking to EU authorities about the
terms of a possible aid package that would trigger an European
Central Bank bond-buying programme and ease its unsustainable
funding costs.

Analysts warned there are still many hurdles ahead and said
the news merely gave markets an excuse to book profits on recent
bearish trades.

Indeed, the budget goes to parliament on Saturday and
debates could last weeks. Spain’s 17 autonomous regions still
must present budgets and find an additional 5 billion euros in
adjustments to meet overall public deficit reduction goals.

“The budget represents two steps forward and one step back,
which is why the euro only moved slightly higher,” said Mary
Nicola, a strategist at BNP Paribas.

Markets are now waiting for Moody’s review of Spain’s
sovereign rating, due at the end of the month. On Thursday,
ratings agency Egan-Jones cut Spain’s sovereign rating further
into junk status, citing the country’s faltering banks and
struggling regional governments.

The euro also rose on the yen, pulling up to 100.22
from a two-week low of 99.64 plumbed Thursday. The
greenback, however, softened against the Japanese currency,
slipping to 77.63.

Among the biggest gainers were commodity currencies, which
had been hit hard in the past few sessions. The Australian
dollar climbed as high as $1.0458, more than one full
cent above a two-week trough of $1.0328 set mid-week.

Resistance is seen at $1.0476, the 50 percent retracement of
its Sept 14-26 fall, ahead of $1.0512 and then the Sept 14 peak
of $1.0625.

Partly helping the Aussie is renewed hopes that China,
Australia’s single largest export market, will deliver more
stimulus to stem its economic slowdown.

A Chinese central bank adviser said on Thursday that Beijing
had severely underestimated this year’s global economic slowdown
and further cuts to interest rates or bank reserve requirements
hinge on any new deterioration in the external environment.