* Euro hits fresh 2014 low against dollar as support cracks
* Swiss franc also under pressure against greenback
* Australian dollar eyes domestic inflation data
By Ian Chua
SYDNEY, July 23 The euro languished at
multi-month lows against many of its peers early on Wednesday,
having moved decisively lower overnight along with an
eye-catching fall in the Swiss franc.
Traders said there was no specific trigger although the
weaker euro dovetailed nicely with expectations for the European
Central Bank to ease policy further.
Some traders noted a big buy order in USD/CHF from a real
money fund had helped push the dollar up on the euro, cracking a
big barrier in the $1.3475-$1.3510 zone.
The dollar climbed 0.5 percent to 0.9027 francs.
The common currency plumbed eight-month lows against the
greenback and the Australian dollar at $1.3459 and
A$1.4304. On the yen, it slid to its lowest in over
five months at 136.58, bringing its 2014 trough of
136.25 yen back in view.
Analysts at BNP Paribas noted the previously strong support
for the euro from capital inflows has now been unwound, with
purchases of foreign securities by European investors
outweighing demand for euro zone assets from abroad.
"The gradual widening in interest rate differentials in
favour of the U.S. also adds to the argument that EURUSD has
scope to fall further as we target 1.32 on our trade
recommendation," they wrote in a note to clients.
The premium offered by two-year U.S. Treasuries over German
debt has widened to around 46 basis points, levels not seen
There were no signs of renewed risk aversion in the wider
market with U.S. and European stocks closing higher on Tuesday
even as geopolitical tensions simmered.
The European Union threatened Russia on Tuesday with harsher
sanctions over Ukraine, while there was no let-up in the
fighting around Gaza.
Softness in the euro helped the dollar index rise to
six-week peaks at 80.837. Even the high-flying sterling ceded a
bit of ground to stand at $1.7066, pulling further away
from a six-year top of $1.7192 set last week.
The Australian dollar managed to hold firm and briefly broke
above 94 U.S. cents after the central bank chief chose not to
talk down the currency at a speech on Tuesday.
It last stood at $0.9394, having reached a two-week
high of $0.9423 overnight.
Aussie bulls are now keenly awaiting domestic inflation data
due at 0130 GMT. An upside surprise is likely to trigger a
bigger market reaction given futures markets have priced in a 36
percent chance of an interest rate cut by year-end <0#YIB:>.
The annual underlying inflation rate is expected to remain
fairly steady at 2.7 percent, while the headline is seen
creeping up to 3.1 percent, just above the Reserve Bank of
Australia's 2-3 percent long-term target.
(Editing by Eric Meijer)