LTRO Outcome Sends Euro, Aussie Lower

By: Barbara Zigah

In Asian trading, the U.S. Dollar came up off of a 3-month low versus a weighted basket of currencies following Ben Bernanke’s speech yesterday which this time around did not allude to the possibility of additional easing. As reported at 12:26 p.m. (JST) in Tokyo, the U.S. Dollar Index traded at 78.72 .DXY, slight above the 3-month low of 78.095 .DXY, which was struck yesterday. Despite the Bernanke rhetoric, the Fed Chairman was unable to alter previous perceptions that the Fed stood at the ready to ease further if the U.S. economic conditions warranted.

Meanwhile, the Euro’s rally faltered following the ECB’s LTRO operation saw strong demand, slightly higher than expectations. According to the ECB, the Eurozone’s banks took €530 billion worth of 3-year loans which carry an interest rate of 1%. Following an initial rally, the EUR/USD pair fell to $1.3341; a 1% decline from Wednesday’s high of $1.3486 struck on the EBS platform. The Australian Dollar was also hit hard on investor profit-taking, trading at $1.0715 well off the 6-month high of $1.0857 struck the previous trading day. Currently, the AUD/USD is trading at $1.0755, regaining 0.2% as better than expected Chinese PMI data helped push it higher.