LONDON, Feb. 25, 2008 (Thomson Financial delivered by Newstex) -- The dollar remained well-supported against major currencies, boosted by reports of a rescue plan for troubled bond insurer Ambac Financial Group (NYSE:AKT) (NYSE:AKF) (NYSE:AFK) (NYSE:ABK) , while a pick-up in risk appetite gave a significant boost to the high-yielding Australian dollar.
Market sentiment has been bolstered by a report late Friday of the rescue for Ambac, which had risked losing its AAA credit rating due to losses on securities linked to unpaid housing mortgages.
'News that Ambac looks likely to receive a bail-out has done something to build confidence and the greenback has posted some gains as a result,' said Gary Thomson, head of sales trading at CMC Markets.
Meanwhile, Asian equities were boosted overnight by a newspaper report suggesting that China's new sovereign wealth fund plans to buy up Japanese stocks.
The pick-up in risk appetite meanwhile has given a further boost to the high-yielding Australian dollar, which hit a fresh three and a half month high against its US counterpart of 0.9264 usd.
The Australian currency has benefited from sharp rises in the gold price, a buoyant economy and the Reserve Bank of Australia's recent interest rate hike.
'With gains of 2 pct so far this month taking it to year-to-date highs, the Aussie looks well-positioned to challenge last October's 24-year high against the US dollar and some positive Australian lead economic indicators on Wednesday would certainly help in that respect,' said Neil Mellor at the Bank of New York Mellon. (NYSE:BK)
Elsewhere, the pound was on the weak side after the latest Hometrack survey showed UK house prices fell for the fifth consecutive month and as investors awaited mortgage lending data from the British Bankers' Association this morning.
Later today, attention will turn to the release of US existing home sales data this afternoon and a speech tonight by European Central Bank president Jean-Claude Trichet.
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