* Aussie hits 8-mth highs after RBA sticks to steady rates
* Sterling flirts with six-year highs on upbeat
* Yellen speaks later Wednesday, ECB rate decision & US
By Ian Chua
SYDNEY, July 2 The Australian dollar hovered
near an eight-month peak early on Wednesday, having been swept
higher by a short squeeze while an upbeat manufacturing survey
helped power sterling to levels not seen in nearly six years.
Both currencies easily outperformed their global peers,
leaving the U.S. dollar to eke out small gains on the euro and
yen as U.S. Treasury yields rose.
The dollar index drifted up to 79.811 from a
two-month trough of 79.740. Against the yen, the greenback edged
up to 101.54 from Tuesday's low of 101.29.
The euro slipped to $1.3682 from a six-week high of
$1.3710 and trimmed gains on the yen that saw it retreat to
138.89 from a three-week high of 139.14.
Traders said there were some worries among euro bulls that
the European Central Bank (ECB) might try to talk down the
currency on Thursday after its policy meeting.
The euro has gained about 2 U.S. cents in three short weeks,
a move that is likely to frustrate the ECB. President Mario
Draghi recently warned that a strengthening currency in a low
inflation environment was cause for serious concern.
Still, with the ECB unlikely to inject more stimulus a month
after delivering wide-ranging measures, analysts said the euro
shouldn't fall too far.
"On EUR/USD, the medium-term view is still one of a lower
exchange rate given the monetary policy divergence," analysts at
JPMorgan wrote in a note to clients.
"But in the near-term EUR/USD should remain in a range given
that the ECB will not announce any additional policy measures
and a hawkish Fed seems to be a fair distance away."
Expectations had also run high among Aussie dollar bears on
Tuesday that the Reserve Bank of Australia (RBA) might sound a
bit more dovish or try to jawbone lower the stubbornly high
When the RBA did not oblige and stuck to its message that
rates will remain steady, investors quickly unwound negative
"There were some expectations that the RBA might, if it
wanted to, be more dovish on some sectors of the economy, but
they were not and AUD broke above the year's highs," said Emma
Lawson, senior currency strategist at National Australia Bank in
The Aussie jumped almost a cent to above 95 U.S. cents
for the first time since early November. It last traded
If it holds atop $0.9498, the 76.4 percent retracement of
its October to January fall, the market will next target
$0.9544, the November high, traders said.
Investors also warmed to sterling after a survey showing
British manufacturing growing at its fastest in seven months
added to the case for a rise in interest rates this year.
The pound scurried to $1.7167, its highest since
October 2008. A return to $1.7322 will mark its 50 percent
retracement of the late-2007 to early-2009 tumble from $2.1162
Asia will be hard pressed to find fresh inspiration on
Wednesday with little in the way of major economic news.
Later in the session Federal Reserve Chair Janet Yellen
gives a speech on "Financial Stability" at an event hosted by
International Monetary Fund Director Christine Lagarde.
(Editing by Shri Navaratnam)