SYDNEY, June 14 (Reuters) – The euro clung on to most of itsovernight gains early in Asia on Thursday, while commoditycurrencies like the Australian dollar came under renewedpressure following a negative close on Wall Street.
The euro last stood at $1.2574, having risen as highas $1.2611 on Wednesday as investors trimmed very bearishpositions on the single currency.
But a three notch downgrade ofSpain’s credit ratings by Moody’s saw the short covering come toan abrupt end.
“This is now the lowest rating among the three main agenciesfor Spain. This may augment the recent stress in the Europeanbond markets today and likely put the Italian bond auctionstoday under greater scrutiny,” analysts at BNP Paribas wrote ina note.
Italy is due to sell up to 4.5 billion euros of bonds lateron Thursday.
The bond sale comes a day after the country’sone year borrowing costs hit a six month high of 3.97 percent ata debt auction.
TheFed bought $4.76 billion of Treasuries due from August 2020 toFebruary 2022 as part of its effort to keep borrowing costs low.
However, traders said there is little conviction in themarket as the overarching focus is on Greece’s election thisweekend.
Canada’s finance minister said the results have thepotential to create a “disruptive moment” on the eve of the G20summit in Mexico, but that policymakers will deal with thatproblem if it arrives.
Syriza,the leftist party opposed to austerity measures, and the NewDemocracy group, which backs Greece’s international bailout, arelocked in a tight race.
The dollar fetched 79.45yen, having traded in a slim range of 79.30 and 79.75 onWednesday.
Reflecting a firmer euro, the dollar index drifted down to 82.143 from a session high of 82.581.
Commodity currencies had a tougher time with the Australiandollar once again retreating from parity against thegreenback.
The kiwi lost a few pips after theReserve Bank of New Zealand said a weak economy and an uncertainglobal outlook meant rates need to stay at record lows.
As expected, the RBNZ kept rates unchanged at 2.5 percentfor a 10th straight meeting.
“We didn’t think the Reserve Bank would cut rates, but thatthey would be ready to react strongly if we did get quite aserious development in the European debt crisis,” said NickTuffley, chief economist at ASB Bank.
US government securities climbedas concern Europe’s sovereign debt crisis is worsening and adrop in US retail sales sent 10 year note yields to a recordlow at a $21 billion sale of the security.
IfEurope continues to muddle through, we don’t believe rates willgo up until March next year at the earliest.
Yvinne Atkinson is a business journalist based in Manchester, UK. Yvinne has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Yvinne spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.