Euro off lows as Aussie eyes data

High-risk currencies such as the Australian dollar started Wednesday’s trading strongly, having performed better than their G3 counterparts with markets preparing for major central banks to announce more policy action.

However, among the world’s three most liquid currencies, the euro performed best. It was last seen trading at $1.2603, rising from a low on Tuesday of $1.2559. Resistance is said to be at $1.2693, a high hit on Friday following the EU summit, in which leaders thrashed out a deal to combat the region’s debt crisis.

Versus the yen, the common currency rose to 100.63, a significant increase from the low on Tuesday of 99.89. However, the euro dropped to a four-and-a-half month low versus the Aussie dollar at A$1.2235. Meanwhile, the Aussie climbed to two-month highs against the yen and US dollar near 82.18 and $1.0300.

Weak data from Europe and the US has raised expectations for the European Central Bank and the Federal Reserve to carry out additional stimulus in order to boost their economies. Dealers said this has encouraged market players to use the two currencies as funding currencies for carry trades.

The ECB will hold its policy meeting tomorrow and is expected to reduce interest rates to record lows. Traders anticipate that the common currency will consolidate between $1.2560 and $1.2660 during the build up to the bank’s meeting.