The Australian dollar extended gains against the US dollar and reached a new one-week high before a European Central Bank tender for low interest three-year loans.

Immediately after the tender, the aussie dollar jumped over 1% to an intraday high of $1.0218 as eurozone banks snapped up nearly €490 billion of the ECB’s first ever offer of three-year loans, well above the €300 billion forecast. The initial reaction was a boost in risk appetite, however this faded shortly as investors soon realised that in the long-term, this will likely not help stem the debt crisis from spreading.

AUD/USD dropped to an intraday low of $1.0061. The operation solves some of the liquidity issues that European banks and government face, however it does not address the more important solvency crisis.