A$ continues winning streak; EURAUD falls to fresh euro-era lows

By Chris Gore | July 18 2012 8:39 PM

The Aussie dollar maintained its north-bound trajectory overnight with strength from both European and U.S equity markets providing a solid backdrop for currencies of higher-yield. European equities set the pace earlier in the session and U.S markets were able to maintain the gains, driven by better-than-expected earnings from tech heavyweights Intel and Honeywell. A jump in housing starts also proved to be positive for sentiment while Fed Chief Ben Bernanke kept the dream of U.S stimulus alive without providing any explicit detail. Bernanke took a similar line to Tuesday’s testimony to the Senate Banking Committee, reiterating, the Fed will “take action as needed to try to make sure that we see continued progress on employment.

Myriad policy options have failed to stop spread of Eurozone debt crisis.

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While risk barometers such as equities and high-beta currencies displayed a risk-on demeanor, Euro-zone uncertainty continues to bubble away in the background with peripheral bond yields notably higher. Spanish debt yields climbed close to the 7 percent region after the latest data showed toxic banking debt increased to an 18-year high – in turn sparking concern Spain’s bailout may not be enough to ring-fence the sovereign from its ailing banking system. The Euro remained the risk currency of most resistance under-performing against its major counterparts despite squeezing out moderate gains against the greenback over the course of the session. The EURUSD pair moved higher towards the 1.23-handle over the session setting intra-day highs of 1.2287. The EURAUD pair maintained a downward trajectory to forge new Euro-era lows of 1.1833 representing a 9 percent fall from highs in May.

Nevertheless, despite the constant threat of an imminent dooms day scenario from the Euro-region, risk contingent currencies soldiered on with the Aussie forging fresh six-week highs again the greenback. At the time of writing the local unit is buying 103.6 US cents with the next level of resistance likely to come just below 104-figure. Local economic data today includes NAB business confidence numbers and RBA FX transactions at 11.30 AEST.