Pound Less Lucky Than Euro Against Buck

NEW YORK ( TheStreet) -- The euro outpaced the U.S. dollar Thursday despite the collapse of the Portuguese minority government as expectations of a central bank rate hike in April prevailed.

The euro was rising 0.6% to $1.4174. CurrencyShares Euro Trust ( FXE) has been up 6.2% for the past year.

However, the U.K. pound sterling-greenback pairing "has not had the luck of the euro," said FXDD Chief Currency Analyst Greg Michalowski. "In fact it's been down, down, down for the most of the trading day."

The pound was falling 0.8% to $1.6111. CurrencyShares British Pound Sterling Trust ( FXB) has been up 7.9% for the past year.

With the Bank of England policymakers split 6-to-3 against interest rate hikes because of the tepid U.K. economic recovery, expectations of a hike in borrowing rates -- currently at a record low of 0.5% -- have been snuffed out in the near term.

Surging commodity prices lent support to commodity currencies such as the Australian dollar, which rallied against the dollar for a fifth straight day. The Australian dollar was gaining 0.8% to $1.0211. CurrencyShares Australian Dollar Trust ( FXA) has been up 12.6% for the past year.

The Thomson Reuters/Jefferies CRB Index representing the long-only investment in commodities has risen more than 7% year to date.

"We do have risk resistance around that 1.02 level, so it seems as though this five-day rally should slowly taper off just ahead of there," Daily Forex currency analyst David Song noted earlier on Thursday.

"I might actually look to take the opportunity to sell the Australian dollar-U.S. dollar pair if we do see prices close or stay below that low level," Daily Forex currency analyst David Song noted.

The European Union summit kicked off Thursday and continues through Friday as Portugal looks all but ready for an European Union bailout following the parliamentary rejection of measures that would've cut government spending and pensions. "We really don't see anything new coming out of the EU summit that could actually weighh on market sentiment," Song said.

The analyst expects to see some euro-dollar congestion over the next 24 hours and an eventual, albeit small correction in the exchange rate.

Rating agency Fitch on Thursday cut Portugal's long-term foreign and local currency issuer default ratings to A- from A+ and placed it on a watch negative list on the possibility of further cuts.

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-- Written by Andrea Tse in New York.

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