July 15, 2012 / 11:24 PM / 5 years ago

Euro and risk currencies supported, Bernanke in focus

SYDNEY (Reuters) - The euro and high-beta currencies like the Australian dollar started trading on Monday with a spring in their step, following a rally late last week in part on the back of diminishing worries about China's economic health.

A successful bond sale by Italy and strong earnings results from JPMorgan (JPM.N), despite its $4.4 billion trading loss, further helped shore up sentiment.

The more positive market mood saw high-beta currencies outperform their G3 peers. The Australian dollar popped above $1.0200, gaining more than a full cent on Friday. It last traded at $1.0237, well off last week's low of $1.0100.

The euro also held firm, trading at $1.2250 versus $1.2241 late on Friday in New York, pulling further away from a two-year trough around $1.2162 plumbed last week. Against the yen, the single currency edged up to 97.80, off a six-week low of 96.43.

Markets are expected to be subdued with Japan closed for a public holiday on Monday. Investors are also anxiously waiting to see if Federal Reserve Chairman Ben Bernanke will signal more monetary policy easing this week.

Bernanke is due to face his twice-yearly grilling by lawmakers in Congress on Tuesday and Wednesday, against a background of lackluster growth at home and a festering sovereign debt crisis in Europe.

"We expect him to reiterate that the Fed is prepared to take further easing actions if necessary, but to give no indication that such action is imminent. Market may find it disappointing and is likely to be USD-supportive," analyst at Barclays Capital wrote in a client note.

U.S. corporate results will also be closely watched, with Citigroup Inc (C.N) next up, followed by Goldman Sachs (GS.N) on Tuesday.

For now, the improved sentiment saw the dollar retreat from a two-year peak against a basket of major currencies .DXY. It also lost ground on the yen, fetching 79.17 yen, not far off a three-week low around 79.07 set on Friday.

There are no major economic data out of Asia on Monday. Last Friday, a key report showed China grew 7.6 percent year-on-year in the second quarter, a result that was in line with analyst forecasts, but far better than what markets had feared.

China's Premier Wen Jiabao said efforts to stabilize the economy are working and the government will step up efforts in the second half of the year to increase policy effectiveness and foresight, the official Xinhua news agency reported on Sunday.

Editing by Wayne Cole

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