* Euro and commodity currencies surge in thin trade
* Australian dollar hits 29-year high above $1.0650
* Spanish auction shores sentiment towards common currency
* Dollar index falls to 16-mth low
(Recasts, adds detail)
By Neal Armstrong and Anirban Nag
LONDON, April 20 (Reuters) - The euro surged to its highest
in 15 months against a weaker dollar on Wednesday, boosted by
better risk appetite and after a bond auction from Spain was
well received by investors.
The response to the Spanish bond auction provided a fillip
to the common currency which is eyeing its Jan. 13, 2010 high of
$1.4582. Traders said, before that the euro would have to clear
option barriers at $1.4550 and $1.4600.
"It is a risk-on theme which means the dollar and yen are
under pressure," said Jeremy Stretch head of currency strategy
at CIBC World Markets. "The Spanish bond auction has added to
pro-euro rally and the next target is $1.4580."
The euro rose more than 1 percent versus the dollar to
$1.4548 <EUR=>, pulling further away from this week's low of
around $1.4155. Traders said stop-losses were triggered through
last week's high of $1.4521 and on the break of $1.4530.
The euro jumped 1.5 percent to 120.18 yen <EURJPY=R>, moving
away from a two-week trough of 116.49 yen hit on EBS earlier
this week. Trading conditions were thin with many dealers
already out for the Easter break.
Data highlighting business activity in Germany and France
continued to outpace the rest of the common currency bloc has
kept alive rate hike expectations by the European Central Bank.
Both the dollar and the yen are usually sold off when risk
appetite is buoyant. Demand for riskier assets like stocks and
higher-yielding currencies picked up as upbeat corporate
earnings in the U.S. raised growth expectations.
Gains in U.S. and European shares soothed market sentiment
after nerves were rattled on Monday by S&P's warning on U.S.
credit ratings and on fears that Greece will have to restructure
its debt.
Intel Corp <INTC.O> forecast revenues well above Wall
Street's targets, sending its shares higher in after hours
trade. [] IBM results also outpaced expectations
and it raised its full-year profit forecast. []
"Investor focus is on the earnings season in the U.S. and
this is key in driving growth expectations and pushing stock
markets higher. This keeps focus away from euro zone periphery
right now," said Manuel Oliveri, currency strategist at UBS in
Zurich.
COMMODITY CURRENCIES BUOYANT
The chase for yields benefitted the Australian dollar, which
hit a fresh 29-year high of $1.0688 to trade up around 1.4
percent on the day <AUD=D4>. Traders said stop-losses were hit
on the break of 1.0610 and $1.0650.
The Canadian dollar <CAD=D4> rose to its highest in over
three years against its U.S. counterpart at C$0.9503, buoyed by
above forecast Canadian inflation on Tuesday and rising
commodity prices.
All of which saw the dollar index fall to a 16-month low of
74.302. Traders said talk of central banks recycling
intervention proceeds into growth-linked currencies and the euro
was also leading to a drop in the U.S. dollar.
As the dollar's value fell, the price of gold <XAU=> hit a
record high above $1,500 and silver <XAG=> rose to a 31-year
high.
Still, the dollar managed to eke out modest gains versus the
yen. It rose 0.2 percent from late U.S. trade on Tuesday to
82.73 yen <JPY=>. Traders said Japanese exporters' offers were
layered in the 83.20-83.50 area with stops seen above 83.50 yen.
Meanwhile, the Swedish crown extended gains against the
euro, with the common currency down 0.4 percent at 8.8855 per
crown <EURSEK=D4> as the Riksbank raised inflation expectations
significantly. [].
But sterling fell sharply against the euro after Bank of
England minutes showed policymaker caution about economic growth
outweighed inflation worries. The euro <EURGBP=D4> was at 88.67
pence, having risen as high as 88.75 pence, and up nearly 1
percent on the day.
(Editing by Toby Chopra)
