By Omer Esiner of Travelex

The dollar held near the lower end of its very recent ranges overnight as investors continued to square positions ahead of the end of the first quarter and key U.S. economic data later this week.

The dollar backed off a 10-month trade-weighted peak late last week after a deal to backstop indebted Greece reduced some near-term risk of a default. The market, which had been heavily positioned against the single currency, has since pared back some of its bets against the euro.

Late yesterday, the Greek government was able to raise five billion euros ($6.73 billion) in a bond auction that found significantly less demand than a similar auction earlier this month. Investors charged Athens twice the interest that Berlin must pay to borrow from the market. The euro found some support from Athens' ability to raise capital, albeit under largely unfavorable terms. Still, the large sums that Greece must refinance in coming months have kept investors nervous about European debt issues, which should ultimately cap the euro's upside.

The pound rebounded further off recent lows after fourth-quarter growth was revised up and home prices rebounded in March. Still, the pound's gains were limited by mounting uncertainty ahead of a general election expected at the beginning of May.

Commodity currencies from Australia, New Zealand and Canada continued to outperform amid a backdrop of firmer stock and resource prices.

EUR: The euro remained well off of its recent lows against the greenback and Canadian dollar as moderating sovereign credit concerns prompted investors to pare back some of their bets against the single currency.

Last week's agreement by the IMF and the EU to backstop Greek debt in the event of an emergency reduced some near-term risk of default and prompted a bout of short-covering in a market that was heavily positioned against the euro.

Yesterday, Athens managed to raise five billion euros in an auction of seven-year government bonds. The auction was not a complete failure, and this added to the marginally improved tone of the single currency this morning.

Still, the auction found far less demand then a similar one earlier this month and Athens was still forced to pay double what the German government is charged by the market. Going forward, continued sovereign credit concerns should keep the spread between Greek and German bonds near historic highs and undermine demand for the euro.

GBP: The pound recovered from recent lows against most of its major rivals overnight after the U.K. government reported that fourth-quarter GDP was revised from its original reading of 0.3% (quarter over quarter) to 0.4%. While the data are now old, they suggest that Britain's economy ended last year with a bit more momentum than previously expected.

Separate data from the Nationwide Building Society showed a 0.7% month-over-month increase in home prices in March, which largely offset a 0.8% month-over-month drop in February. Year over year, home prices rose by 9.0%. The news overnight did reduce some concerns about the lagging nature of Britain's economic recovery and prompted a bit of short-covering in the pound. Still political uncertainty ahead of an election around the middle of the year continues to weigh on the currency. The latest poll showed a very small lead for the opposition Conservatives, but not enough to avoid a hung parliament, which many fear will undermine the government's efforts to enact much-needed fiscal reforms.

AUD: Even among the broadly firmer commodity currencies, the Australian dollar continues to stand out as a top performer. Moderating sovereign credit worries helped improve investor risk appetite and lift higher-yielding but riskier assets like the Australian currency. An improving yield outlook also remains a key driver of the aussie's recent strength. Yesterday, Reserve Bank of Australia Governor Stevens said that rates can not remain excessively low and warned against speculation in real estate. His comments all but cemented expectations for another 25 basis point hike when the RBA meets next week.

CAD: Data this morning showed that wholesale prices in Canada were flat in February, exactly as expected. PPI was unchanged on a monthly basis last month and fell by 0.6% year over year. Softer input prices like energy and metals brought down the overall level of PPI. The figures are not likely to reduce mounting speculation that Canada's central bank will move to normalize lending rates sooner than previously expected. Strong GDP figures tomorrow would add to that speculation and could see the Canadian dollar retest its recent highs. The loonie was mostly unchanged on this morning's PPI news.
Omer Esiner serves as the Senior Currency Market Analyst at Travelex, Inc. a global financial institution specializing in corporate foreign exchange services and international payment solutions. In this capacity, he monitors, analyzes and interprets the economic, financial, political and technical factors that drive the movements of more than 100 currencies for Travelex. Mr. Esiner explains the currency markets' reaction to market events to clients, employees and members of the media.

You can view his daily reports, recording briefings, and quarterly reviews posted here. As an expert in foreign exchange, Mr. Esiner is quoted regularly by the financial media including The Wall Street Journal, CNN, Dow Jones Newswires, Reuters, the Nightly Business Report, National Public Radio, among others. Based in Washington, D.C., Esiner joined Travelex in February 2000. Prior to his current position, Esiner was a currency trader for several years. Mr. Esiner holds a bachelor's degree in economics from the University of Maryland, College Park. He is fluent in Turkish and proficient in Spanish.