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FOREX-Euro dips vs dlr; Aussie, kiwi jump on rates focus

Published 12/10/2009, 04:27 AM
Updated 12/10/2009, 04:30 AM

* Euro dips vs dlr; concerns about Greece, Spain weigh

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

* Kiwi gains 1.4 pct vs dollar; BoE policy decision 1200 GMT

* SNB keeps FX intervention threat

By Jessica Mortimer

LONDON, Dec 10 (Reuters) - The euro dipped against the dollar on Thursday on concerns over the poor fiscal health of Greece and Spain highlighted by rating agencies in recent days.

The Australian and New Zealand dollars jumped, however, on expectations of higher interest rates after strong Australian jobs data and as the Reserve Bank of New Zealand signalled rates there may go up sooner than thought.

Standard & Poor's cut Spain's credit outlook to negative on Wednesday after Fitch had downgraded Greece's credit rating, sparking concerns about sovereign debt and highlighting the troubles facing some countries on the euro zone periphery.

"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.

This could mark a switch from the recent trend for currency markets to trade on the basis of risk sentiment, where the euro tended to gain in tandem with perceived higher risk currencies such as the Australian dollar.

"With the troubles in Greece and Spain there are a lot of difficulties in the euro zone, which is one reason why the euro is weak," she added.

By 0920 GMT, the euro was down 0.1 percent against the dollar at $1.4710, 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.

"There are still a lot of sovereign rating type concerns and from the euro perspective that's going to keep the euro/dollar restrained in the short term," said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.

The dollar index, which tracks the greenback against a currency basket, was up 0.1 percent at 76.106, while the dollar gained 0.4 percent against the yen to 88.24 yen.

Sterling edged up 0.1 percent against the dollar to $1.6284 before a Bank of England interest rate decision at 1200 GMT, where no change in policy is expected.

Elsewhere, 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.

The euro briefly rose to a session high around 1.5131 francs before dipping back down to around 1.5116, little changed on the day.

AUSSIE, KIWI GAIN

The Australian dollar rose 0.8 percent against the dollar to $0.9157, while the New Zealand dollar gained 1.4 percent to $0.7284, hitting its highest in a week, with both bolstered by expectations interest rates will rise.

Australian employment beat forecasts in November and stoked expectations for a rate increase in February.

The Reserve Bank of Australia has raised rates for three months in a row, to 3.75 percent, and interbank futures fell as the market priced in a higher chance of another move.

"A hike in February looks more and more likely," said Brian Redican, a senior economist at Macquarie in Australia.

The Reserve Bank of New Zealand (RBNZ) held rates steady at 2.5 percent but altered its tone and said it may begin removing policy stimulus by the middle of 2010..

U.S. weekly jobless claims at 1330 GMT will be watched for evidence supporting a better-than-expected monthly jobs report last week, which sent the dollar higher as investors began to bring forward their expectations for U.S. rate hikes.

(Additional reporting by Charlotte Cooper in Tokyo)

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