Forex News – Euro hits new two week high against dollar

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The euro hit a two-week high against the dollar and the yen early in to the European trading session on Thursday with sentiment supported by better risk appetite.

EURUSD rose as high as 1.2892 at 09:00 GMT  from a session low of 1.2839.

EURJPY peaked at 98.95 from 98.54.

A “squeeze” on short positions that had been building up recently was due and many investors are unwinding their short positions, which is causing alot of the lift in the euro dollar pair.

News that the International Monetary Fund is seeking to increase its lending resources by raising $500 billion in new funds resources to help countries deal with fallout from the euro zone debt crisis helped boost risk appetite.

Meanwhile, attention is on the Spanish and French auctions due today as well as the Greek debt talks.

The bond sales will test market sentiment which has been fairly upbeat in the past two days. So far, debt sales in the euro zone  been very successful despite the Standard & Poor’s mass downgrade of euro zone sovereign debt last Friday.

“The Spanish auction is of more importance to the euro with expectations quite high given last week’s success,” said Chris Walker, a currency strategist at UBS.