The euro rallied to a three-week high against the dollar on Thursday, swept higher by demand from a semi-official European name and a wave of stop-loss buying and extending a rally after Greecemoved a step closer to securing international aid.
The single currency jumped to a 15-month high versus sterling, also boosted after comments from European Central Bank President Jean-Claude Trichet reinforced speculation that the ECB will raise interest rates next week.
The euro cheered the Greek parliament's passage of tough austerity measures on Wednesday, enabling the debt-stricken country to secure more emergency funding from the EU and the International Monetary Fund and staving off the threat of a debt default for now.
Athens on Thursday is expected to pass another vote on how to implement the plan, clearing the last obstacle to the release of 12 billion euros ($17.3 billion) of funding, which is essential to meet debt payments by mid-July.
With talks progressing on a second aid package, analysts believe the view that the euro zone debt crisis is under control for the time being and that will propel the euro higher.
"In the short term, at least, a Greece default is unlikely, and this is positive for the euro and also other risky assets," said You-Na Park, currency strategist at Commerzbank in Frankfurt.
She added: "In the course of the next week or so, a second aid package should be decided, so there is room for the euro to rise more."
In addition, broad speculation that euro zone interest rates will rise next week and perhaps again later in the year would support the euro, and Park said a test of $1.50 in the near term was possible.
The euro rose as high as $1.4522, according to electronic trading platform EBS, before trimming gains to trade at $1.4480 by 0938 GMT up 0.2 percent on the day.
Traders said sovereign selling in the single currency had capped the euro's rise, while bids in the mid-$1.44 region were seen as acting as a support.
The single currency is poised to gain nearly 1 percent versus the dollar in June, having been volatile all month as investors became jittery about whether the euro's relative strength was warranted given Greece's debt problems.
Gains in the euro and other currencies considered higher risk, including the Australian and New Zealand dollars -- the latter of which hit a post-float high in earlier trade -- knocked the dollar lower versus a currency basket.
The dollar index traded 0.3 percent lower as 74.498, having hit 74.255, its weakest since mid-June. It slipped roughly half a percent on the day to 80.40 yen .
ECB RATE OUTLOOK
Bolstering the euro was the view that the European Central Bank will raise interest rates by 25 basis points to 1.5 percent next week, which would increase the single currency's rate advantage over the dollar.
Some analysts said more encouraging data in the U.S., including recent housing figures, and signs the Japanese economymay be recovering more quickly from its earthquake than expected, were helping to improve the broad outlook for the global economy through the second half of 2011.
Deutsche currency strategist Henrik Gullberg said this view would further stock risk appetite, prompting investors to take on more long euro positions -- or bets to buy the currency -- after cutting back on those positions recently.
"Uncertainty about the global outlook, as well as Greece, has meant that a lot of long positions in risky currencies have been scaled back," he said.
"Positioning is very light now, and there's a lot of room to go back into these trades, which to some extent is what we're seeing now."
At the same time, increasing concerns about the U.S. debt situation may sour sentiment for the dollar as Washington struggles to raise its budget limit.
Failure to increase the debt ceiling, which caps how much the United States can borrow, would likely trigger a default that could plunge the world's biggest economy into a new recession and roil global financial markets.
The single currency jumped to a 15-month high versus sterling, also boosted after comments from European Central Bank President Jean-Claude Trichet reinforced speculation that the ECB will raise interest rates next week.
The euro cheered the Greek parliament's passage of tough austerity measures on Wednesday, enabling the debt-stricken country to secure more emergency funding from the EU and the International Monetary Fund and staving off the threat of a debt default for now.
Athens on Thursday is expected to pass another vote on how to implement the plan, clearing the last obstacle to the release of 12 billion euros ($17.3 billion) of funding, which is essential to meet debt payments by mid-July.
With talks progressing on a second aid package, analysts believe the view that the euro zone debt crisis is under control for the time being and that will propel the euro higher.
"In the short term, at least, a Greece default is unlikely, and this is positive for the euro and also other risky assets," said You-Na Park, currency strategist at Commerzbank in Frankfurt.
She added: "In the course of the next week or so, a second aid package should be decided, so there is room for the euro to rise more."
In addition, broad speculation that euro zone interest rates will rise next week and perhaps again later in the year would support the euro, and Park said a test of $1.50 in the near term was possible.
The euro rose as high as $1.4522, according to electronic trading platform EBS, before trimming gains to trade at $1.4480 by 0938 GMT up 0.2 percent on the day.
Traders said sovereign selling in the single currency had capped the euro's rise, while bids in the mid-$1.44 region were seen as acting as a support.
The single currency is poised to gain nearly 1 percent versus the dollar in June, having been volatile all month as investors became jittery about whether the euro's relative strength was warranted given Greece's debt problems.
Gains in the euro and other currencies considered higher risk, including the Australian and New Zealand dollars -- the latter of which hit a post-float high in earlier trade -- knocked the dollar lower versus a currency basket.
The dollar index traded 0.3 percent lower as 74.498, having hit 74.255, its weakest since mid-June. It slipped roughly half a percent on the day to 80.40 yen .
ECB RATE OUTLOOK
Some analysts said more encouraging data in the U.S., including recent housing figures, and signs the Japanese economymay be recovering more quickly from its earthquake than expected, were helping to improve the broad outlook for the global economy through the second half of 2011.
Deutsche currency strategist Henrik Gullberg said this view would further stock risk appetite, prompting investors to take on more long euro positions -- or bets to buy the currency -- after cutting back on those positions recently.
"Uncertainty about the global outlook, as well as Greece, has meant that a lot of long positions in risky currencies have been scaled back," he said.
"Positioning is very light now, and there's a lot of room to go back into these trades, which to some extent is what we're seeing now."
At the same time, increasing concerns about the U.S. debt situation may sour sentiment for the dollar as Washington struggles to raise its budget limit.
Failure to increase the debt ceiling, which caps how much the United States can borrow, would likely trigger a default that could plunge the world's biggest economy into a new recession and roil global financial markets.
