* Euro hits 11-wk high $1.3091, $1.3050 barriers broken
* Dollar index hits three-month low 81.535
* Focus on whether euro can climb above $1.3125
* Investors buy euros before mth-end; eurozone data supports
By Naomi Tajitsu
LONDON, July 29 (Reuters) - The euro hit an 11-week high
against a broadly weak dollar on Thursday as month-end demand
for the single currency helped push it above a key barrier.
The euro remained supported by firm euro zone data, with
figures on Thursday showing euro zone economic sentiment jumping
to a 28-month high, while German unemployment declined for the
13th consecutive month. [] []
This contrasted with recent weak data out of the U.S. which
has weighed broadly on the dollar, with investors mindful that
figures on Friday are expected to show slower economic growth in
the country in the second quarter. <ECONUS>
Market participants said demand for euros from an Asian
central bank in early European trade had sparked wider demand
for the single currency, helping push the dollar to a
three-month low versus a currency basket.
"Data in the euro zone for now is pretty resilient and at
the margins that argues for euro/dollar to edge higher, though
people are pretty cautious at these levels," said Tom Levinson,
currency strategist at ING.
By 1137 GMT, the euro <EUR=> was up 0.6 percent at $1.3075,
just shy of a high of $1.3091, its strongest since May 10.
Traders said stop-loss orders were triggered above $1.3050,
accelerating the currency's gains, with options barriers seen at
$1.3100.
"There are a lot of orders in the $1.3050 area which had
been targeted. When those were triggered it made for a higher
euro/dollar," said Lutz Karpowitz, strategist at Commerzbank in
Frankfurt.
So far this month, the euro has risen around 7 percent
versus the dollar. Investors are now focusing on whether it can
rally to $1.3125, the 38.2 percent Fibonacci retracement of the
peak-to-trough move from November 2009 to June.
Gains in the euro helped push the dollar <.DXY> down to
81.535 versus a currency basket, its weakest since late April.
Some in the market said California Governor Arnold
Schwarzenegger's announcement that the state was in a state of
emergency over its finances was another reason to dump the
dollar as it highlighted the country's fiscal problems.
[]
MONTH-END EURO DEMAND
Analysts said investors who had been wary of buying the euro
before last week's bank stress test results were picking up the
single currency again before the month ends, while ongoing short
covering would also work in the euro's favour.
At the same time, Citi analysts said investors would sell
dollars before the end of the month to hedge the currency
exposure on their holdings of U.S. assets.
In a note, they said investors continued to buy U.S.
equities into the end of July as U.S. stock markets outperformed
the rise in other global equities.
"This suggests that investors will be on balance net sellers
of USD to bring their hedges in line with the increased value of
their U.S. assets," they said, adding that the signal to sell
dollars was "quite strong".
The New Zealand dollar <NZD=D4> rose 0.9 percent to $0.7268,
recovering from an earlier fall after the central bank raised
interest rates by a quarter point, as widely expected, but
warned that further hikes could be more gradual. []
The New Zealand dollar's recovery was aided by a rise in the
Australian dollar <AUD=D4>, which climbed more than 1 percent to
$0.9044, nearing an 11-week high hit earlier in the week.
(Additional reporting by Jessica Mortimer; editing by Stephen
Nisbet)
