* Euro extends gains, could reach $1.50 within months
* Risk-on sentiment hurts dollar and yen
* Aussie at 29-yr high; USD weighed by looming govt shutdown
(Adds quote, updates prices)
By Jessica Mortimer
LONDON, April 8 (Reuters) - The euro rose to a 15-month high
against the dollar on Friday, supported by expectations of more
euro zone interest rate hikes, while the prospect of a U.S.
government shutdown pushed the dollar lower across the board.
The euro <EUR=> rose to $1.4422 on the EBS trading platform,
helped by reported Middle East sovereign demand, though traders
expected it to struggle to breach $1.4430, where there was talk
of a large option barrier being defended.
The dollar fell to its lowest since December 2009 versus a
basket of currencies as the White House and Congress worked
frantically to break a U.S. budget deadlock by the end of the
day in order to avoid a government shutdown. []
Investors were also lured by the prospect of higher yield as
buoyant equity and commodity prices buoyed their appetite for
taking on risk. This propelled the Australian dollar to a fresh
29-year high versus the greenback and dented the low-yielding
Japanese yen, which hit an 11-month low versus the euro.
"For euro/dollar the $1.50 level is a possibility in the
next few months," said Dennis van den Bosch, senior portfolio
manager in Henderson Global Investors currency team.
"However we don't hold a long euro/dollar position because
the risk/reward profile is not strong enough. For us there is
better risk/reward in being long of currencies such as
Australian dollar at the moment," he added.
The European Central Bank raised its key interest rate by 25
basis points to 1.25 percent on Thursday and the bank's
president Jean-Claude Trichet said policymakers were ready to
tighten further if needed. []
FX market participants interpreted the comments as signaling
progressive rather than aggressive rate hikes ahead, but
analysts said the prospect of another rate rise this summer
would continue to support the euro.
The euro was up 0.8 percent at $1.4413 <EUR=>. Traders
reported substantial option-related offers ahead of the $1.4430
barrier.
A break of this level would target $1.4450, marking the 61.8
percent retracement of the move from the euro's record high
above $1.6 hit in 2008 to the 2010 low of $1.1876. It would then
be in sight of $1.4500 and the Jan. 2010 high around $1.4580.
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For a chart on the euro: http://r.reuters.com/gut88r
ECB in graphics: http://r.reuters.com/kah88r
The euro zone's debt struggle: http://r.reuters.com/hyb65p
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SEARCH FOR YIELD
The dollar index <.DXY> lost more than half a percent,
hitting a low of 75.100, while the higher-yielding Australian
dollar <AUD=D4> jumped to a 29-year high of $1.0544.
"We're seeing broad-based dollar selling, especially against
currencies with a favourable yield," said Carl Hammer, currency
strategist at SEB in Stockholm.
Helped by oil prices hitting a 32-month high, the Canadian
dollar <CAD=D4> also hit its strongest in three and a half years
versus the greenback at C$0.9526.
The U.S. dollar rose against the yen, however, trading up
0.3 percent at 85.28 yen <JPY=>, near a six-month high of 85.53
hit earlier this week.
Market players said the yen could weaken further on interest
rate differentials and concerns about the economic impact from a
massive earthquake and tsunami that struck Japan on March 11.
The euro rose more than 1 percent to an 11-month high near
123 yen <EURJPY=R>, according to Reuters data. This took it well
above the top of the weekly Ichimoku cloud, a widely used
Japanese technical analysis, at around 122 yen. A weekly close
above there would be seen as a buy signal.
(Additional reporting by Neal Armstrong; Editing by Toby
Chopra)
