Aussie jumps to 12-wk peak vs euro ahead ECB meeting

* Aided by strong trade data, buoyant stock markets

* Markets await ECB rate decision, any exotic moves

By Koh Gui Qing

SYDNEY, April 2 (Reuters) - The Australian dollar AUD= jumped on Thursday, rising to a 12-week high against the euro and above 70 U.S. cents, helped by surprisingly strong trade data and expectations of an interest rate cut in the euro zone.

The Aussie raced to a high of 0.5302 euros AUDEUR=R, a level last seen on Jan. 7, and compared to 0.5214 seen here late Wednesday. Against a weaker U.S. dollar, the Aussie jumped to $0.7031, from Wednesday's $0.6880.

"It's done well today because we've got good trade data. The general tenor is that the intense gloom is dissipating," said Peter Jolly, a research head at National Australia Bank.

Data showed on Thursday Australia's trade surplus more than doubled in February, as exports of resources remained surprisingly resilient in the face of global recession, while imports were curbed by sagging demand at home. [ID:nSYD491080]

Expectations the European Central Bank may cut interest rates by 50 basis points to a record low of 1.0 percent on Thursday helped lift the Aussie against the common currency, contributing to the strength of the local dollar.

There is speculation the European Central Bank (ECB) may also adopt quantitative easing by buying corporate bonds to stimulate the economy.

Such a move may boost the Aussie in the long run because it is highly unlikely Australia will need to use quantitative easing, which can erode the value of currencies, said Alan Ruskin, an analyst at RBS.

"Arguably the Aussie would be the favorite long versus the euro as ECB actions reinforce both a positive risk trade and the Reserve Bank of Australia's increasingly rare non-quantitative easing status," Ruskin said.

Quantitative easing occurs when central banks flood financial markets with cash by printing more money.

Australia's interest rates stand at 3.25 percent now, high compared to countries such as Japan and United States, where rates are virtually zero, forcing central banks there to use quantitative easing.

Australia's central bank is set to hold its monthly policy meeting on April 7 although investors are still torn as to whether it will hold rates steady, or cut by between 25-50 basis points.

Demand for riskier, higher-yielding currencies were also helped on Thursday by buoyent Asian stocks markets as investors ignored grim data about the U.S. labour market. [MARKETS/ASIA]

Investors' improved risk appetites helped the Aussie to rise against the yen as well to 69.49 yen AUDJPY=, flirting with a 4-1/2-month high of 69.62 yen struck on March 24.

But Aussie bond futures trimmed earlier gains as the flow of safe-haven funds slowed.

The three-year contract YTTc1 fell 0.03 points to 96.61, reversing from earlier gains, while ten-year bond futures YTCc1 rose 0.02 points to 95.64. ... read original article
Thu 2nd April 2009 - 04:44pm