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FOREX-Aussie, kiwi jump on rates focus; euro weak

Published 12/10/2009, 06:44 AM
Updated 12/10/2009, 06:48 AM

* Aussie, kiwi gain on rate hike prospects after jobs, RBNZ

* Euro edges up vs dlr but Greece, Spain worries still weigh

* Kiwi gains 1.3 pct vs dollar; BoE policy decision 1200 GMT

* SNB keeps FX intervention threat

By Jessica Mortimer

LONDON, Dec 10 (Reuters) - The Australian and New Zealand dollars rose sharply on Thursday on growing expectations of higher interest rates, while concerns over fiscal health in Greece and Spain kept the euro weak versus the dollar.

Strong Australian jobs data fuelled anticipation that rates will rise further in Australia and the Reserve Bank of New Zealand signalled its rates may rise sooner than thought.

The euro steadied against the dollar, close to lows hit on Wednesday, as sentiment towards the currency stayed negative after ratings agencies highlighted the troubles facing some euro zone countries. Standard & Poor's cut Spain's credit outlook to negative on Wednesday after Fitch had downgraded Greece's credit rating, sparking concerns about selected sovereign debt.

"The euro has probably taken a bit of a hit from these internal problems in the euro zone," said Johan Javeus, currency strategist at SEB in Stockholm.

He said these problems may be sparking renewed concerns among some non-European investors about the potential for the euro zone to break up, although most still see this as extremely unlikely.

Speaking on Thursday, ECB Governing Council member Ewald Nowotny said the current worries about Greece's finances would not split the euro zone

By 1123 GMT, the euro was steady against the dollar at $1.4728, not far from a low of $1.4667 hit on Tuesday according to Reuters data, its weakest since early November.

Traders said the euro was likely to see support above its 100-day moving average around $1.4630. Gains on equity markets also helped the euro off its lows. European shares were up 0.8 percent.

Any gains for the euro, however, were small in comparison to those made by the Australian and New Zealand dollars.

This prompted some analysts to speculate that the market could be switching from the recent trend of trading on risk sentiment, which has seen the euro tend to gain in tandem with higher-yielding currencies like the Australian dollar.

"Interest rates are becoming a more important factor and the market is looking more at fundamentals now," said You-Na Park, Commerzbank analyst in Frankfurt.

The Australian dollar rose 0.8 percent against the dollar to $0.9158, while the New Zealand dollar gained 1.2 percent to $0.7272, hitting its highest in a week, with both bolstered by expectations interest rates will rise.

BOE EYED

Sterling rose 0.3 percent against the dollar to $1.6316 while the euro fell 0.3 percent to 90.26 pence, with some traders citing UK corporate buying of sterling.

Investors awaited a Bank of England interest rate decision at 1200 GMT. It is expected to hold rates at 0.5 percent and leave its quantitative easing target unchanged. Any impact on sterling is expected to be minimal.

The Swiss franc dipped briefly after the Swiss National Bank held interest rates steady and stuck to its pledge to fight an appreciation of the franc decisively.

This was tempered, however, as the bank dropped its offer to buy corporate bonds, the first signs it was easing drastic stimulus measures, and as SNB chairman Jean-Pierre Roth said the franc had stayed stable versus the euro.

The euro briefly rose to a session high around 1.5131 francs before dipping back down to around 1.5106, little changed on the day.

The dollar index, which tracks the greenback against a currency basket, was steady at 76.007 while the dollar gained 0.6 percent against the yen to 88.41 yen.

(Reporting by Jessica Mortimer)

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