$A rallies on euro deal
Market watch top headlines
SYDNEY, June 29 AAP
June 29 2012, 5:39PM
The Australian dollar has risen to its highest level in more than a week after European leaders announced a deal aimed at reducing borrowing costs for Spain and Italy.
At 1700 AEST on Friday, the Australian dollar was trading at 101.78 US cents, up from 101.15 cents at Thursday's close.
It had risen to 81.02 Japanese yen, up from 80.36 yen, but slipped to 80.83, from 80.90 euro cents.
During intraday trade it rose to 101.98 US cents, its highest level since June 21.
Earlier in the day the currency traded as low as 100.19 US cents, but Easy Forex senior dealer Francisco Solar said it jumped sharply after the euro zone deal was announced.
Euro zone leaders meeting for a two-day summit in Brussels announced measures to provide direct support to struggling banks, thereby taking pressure off national budgets.
The deal, announced on Friday use the euro zone's 500-billion-euro ($A623.32 billion) bailout fund to recapitalise ailing banks, particularly those in Spain and Italy, directly.
"Markets have really taken kindly to that and the Australian dollar has tracked higher this afternoon," Mr Solar said.
He said the Australian dollar could rally further as European markets open and the leaders meet for day two of the summit.
"I wouldn't be surprised if there is a second wind on the back of this.
"The market was very short leading into the summit, there wasn't much of an expectation that anything would happen, so it won't take much to push the market the other way."
Meanwhile, Australian bond future prices fell sharply on news of the European agreement.
Nomura rates strategist Martin Whetton said the announcement came in the middle of what had been a quiet trading day.
"There was a rather dramatic fall which was exacerbated by the liquidity," he said.
However, he said future prices regained some of their losses during the afternoon.
At 1630 AEST on Friday, the September 10-year bond futures contract was trading at 96.965 (implying a yield of 3.035 per cent), down from 97.035 (2.965 per cent).
The September three-year bond futures contract was at 97.600 (2.400 per cent), down from 97.680 (2.320 per cent).
The Reserve Bank of Australia's trade weighted index was at 76.5, up from 76.2 on Thursday.
By Evan Schwarten