The ICE dollar index, which measures the dollar’s performance against a basket of six major currencies, rose to 79.21, up 0.2 percent from late Tuesday.

The dollar rose to its highest point against the yen since August. The Japanese currency has been declining every day against the greenback since February 14, when the Bank of Japan announced quantitative easing to stimulate Japan’s economy by adding 10 trillion yen to its asset-buying program. This increase in money supply is putting downward pressure on the yen. USDJPY hit a high of 80.39 in New York today versus 79.84 high on Tuesday.

Sterling tumbled against the dollar after dovish Bank of England minutes showed that two of its nine policy makers had voted earlier this month for more aggressive stimulus of GBP75 billion of additional bond purchases rather than the GBP50 billion, which was eventually agreed upon. This raises speculation that the BOE might expand QE further again.  GBPUSD tumbled over 1 percent on the day to reach a low of 1.5647. The pound also fell against the euro, pushing the single currency to its highest level in more than two months. EURGBP hit a high of 0.8458.

Euro was flat against the dollar as gains made after the Greek bailout deal remain capped due to concerns surrounding the implementation of the austerity plan and private sector bond swap. EURUSD is likely to remain trapped within a 1.3180-1.3280 range for now as markets take on a cautious tone.

Crude oil prices were buoyed by lingering fears of a supply disruption from Iran due to a European embargo. Crude hit a high of $106.69 in New York trading.

Gold surged to a three-month high of $1,781.38, gaining over $30 in the New York trading session on technical factors, after breaking key resistance levels. Also, gold is taking direction from other metals, primarily platinum prices, which hit their highest in five months on supply worries driven by a labor dispute in South Africa, the world’s top platinum producer.

Meanwhile today, the preliminary Markit purchasing-managers index fell to 49.7 in February from 50.4 in January, indicating contraction and reinforcing concerns that Europe may be heading into a recession.

EURUSD remains confined in a range, trading between 1.3262 and 1.3213 in European hours.

Sterling dropped sharply against the dollar and the euro after a dovish Bank of England policy meeting minutes which showed that two policy makers voted for expanding the  bond-buying program to boost the U.K. economy. Although the BOE expanded QE by 50 billion pounds instead of 75 billion proposed, the fact that the vote was not unanimous raises speculation that the bank could resort to more quantitative easing in its next policy meeting unless UK economic data improve.

GBPUSD tumbled to 1.5660 from an early session high of 1.5812. EURGBP rose to its highest level since December 13 last year, hitting 0.8446.

The yen hit a seven-month low against the dollar, as the Japanese currency is suffering from policy easing measures announced by the Bank of Japan last week. Interest rate differentials between Japan and the U.S. have been widening in the dollar’s favor, and the strengthening U.S. economy is helping the dollar gain against yen. USDJPY broke past the key 80 yen level to hit a high of 80.36 in the European session.  EURJPY climbed to a three-month high of 106.31.

The ICE dollar index, which measures the USD performance against a basket of six major currencies, rose to 79.233 today from 79.023 late Tuesday.

Looking ahead, the markets will focus on January U.S. existing home sales data due at 1500 GMT today.

The euro zone flash manufacturing PMI for the 17-countries using the euro, fell to 49.0 in February from 48.8 January, indicating continued contraction despite a marginal move up.  A reading below 50 indicates a contraction, above indicates expansion. The data was below forecasts of 49.4

Concerns over the euro zone’s growth prospects are centered on the sovereign debt crisis that has forced Greece, Portugal and Ireland to take billions of euros in bailout funds after their borrowing costs soared out of control.

Just this week euro-zone finance ministers agreed on a new 130 billion euro bailout for Greece in an attempt to tackle the crisis. However the austerity measures that these and other governments are pursuing to cut their debts are likely to suppress growth for some years to come.

According to the minutes, the two members of the banks’ Monetary Policy Committee (MPC) were Adam Posen and David Miles, who both dissented from the panel’s decision to expand QE by 50 billion pounds to a total of 325 billion pounds, calling instead for a 75 billion pound expansion.

Quantitative easing results in a weakening of the British currency, due to printing more money.

GBPUSD fell after the minutes were released today, from 1.5805 to 1.5694.

EURGBP rose to a two-month high of 0.8432 from 0.8380.

China’s new export orders shrank in February the most in eight months, showing a worrying sign of the impact of the euro area debt crisis.

The new export orders sub-index dropped to 47.4, the lowest in eight months, from 50.4 in January as the European debt crisis cast a shadow over Chinese exports. Overall new orders were flat at 49.1, a level that indicates they were falling.

In anticipation of the weak data, China’s central bank (People’s Bank of China) announced its decision over the weekend to cut commercial banks’ reserve requirements by 50 basis points as of February 24, to stimulate growth and support an economic expansion.

The 130 billion euro rescue package has given some relief to markets since a disorderly default by Greece has been averted ahead of a March 20 bond redemption. However, the deal still faces several hurdles, including the successful completion of a bond swap offer to private creditors, as well as parliamentary approvals in Germany, Austria, Finland and the Netherlands.

EURUSD has not taken any clear direction since the deal was struck and has been trading sideways but remains above key support levels above $1.32.  The pair opened in Asia at 1.3230 with highs of 1.3247 and lows of 1.3210.

The US dollar was firm against the yen, breaching the psychologically important level of 80.00 yen for the first time since August  4. The yen’s weakness is due to recent momentum to sell the Japanese currency after the Bank of Japan eased monetary policy, but also due to Japan’s record trade deficits. USDJPY peaked at 80.07 during Asian trading. EURJPY reached 105.98.

The ICE Dollar Index, which tracks the greenback against a basket of currencies, edged up slightly to 79.145 from 79.094.

The Australian dollar traded lower in Asia compared to Tuesday, reacting very little to data from its major trading partner, China. The HSBC flash PMI for China gave a slightly better reading, which showed a bounce to 49.7 in February from 48.8 the previous month.  AUDUSD touched its lowest level in three weeks, reaching lows of 1.0609 before bouncing back up to where it opened the session.

Looking ahead, the market will be watching a meeting of finance officials from the G20 nations in Mexico this weekend for any further developments on international support for the euro-zone.

US markets are playing catch up today after being closed on Monday for the President’s day holiday, and North American investors are beginning to digest the news of the approval of the 130 billion euro rescue package for Greece, that was signed off by euro zone finance ministers in Brussels in the early hours of Tuesday morning. U.S. stocks gained and bonds fell, indicating the deal made investors feel more confident shifting to riskier from safer assets.

The immediate relief rally was on the short-term positive fact that Greece has avoided defaulting on bond-redemption payments due on March 20. However, the euro has been unable to break above the key threshold of $1.33, as investors realized there are still a number of unknowns and areas of ongoing concern and are unwilling to push the euro higher. Investors are concerned about how Greece would implement the harsh austerity measures that they have been pressured to agree on in order to be approved for additional aid from its European partners and the International Monetary Fund.

Meanwhile, euro zone consumer confidence data released this afternoon showed an increase for the second consecutive month in February as Europeans showed signs of increased spending after last year’s collapse in morale. The positive data helped buoy the euro. The focus turns to euro zone provisional purchasing managers surveys on manufacturing and services activity on Wednesday. Improved data will be positive for the euro.

The euro hit a fresh three-month high against the yen in European trading, and peaked close to that high in New York trading, reaching 105.77.  The yen hovered near multimonth lows against most other major currencies as last week’s surprise easing by the Bank of Japan prompted speculators to step up selling of the yen.  USDJPY hovered near a six-month high, range bound around 79.61 – 79.79.

Sterling dipped lower against the dollar in US trading, touching lows of 1.5771. Earlier in the day GBPUSD hit highs of  1.5864.

The Canadian dollar traded weaker against its US counterpart after Canadian retail sales data disappointed markets by falling more than expected in December. USDCAD reached highs of  0.9973.

Euro zone finance ministers signed off on a 130 billion euro bailout for Greece to avert a disorderly default in March when bond redemptions are due, after persuading private bondholders to take greater losses on holdings of Greek debt. Also the Greek government agreed to commit to deeper cuts.

Spot gold rose around $20 on the day to $1,749.27 an ounce by 1502 GMT,  the highest level in 12 days. Most active U.S. April golf futures rose nearly 0.9 percent to $1,740.60 an ounce.

Gold has recently been trading more like other metals, as a risk asset, rather than a risk hedge. It has been taking direction from the euro. Gold’s correlation with the single currency is holding close to 50 percent, compared with a correlation of around just 30 percent two weeks ago, indicating that it is more likely to move in tandem with the euro than against it.

Recently oil has given a strong rally, due to strong US data showing evidence of recovery in the world’s largest economy. However, rising prices are also due to a loss of global supplies due to tensions in Iran, as concerns persist over Middle Eastern supply constraints, with Iran threatening to further cut oil exports.

Recently, Western sanctions on Iran affected supplies from Iran which is OPEC’s second-largest producer. The European Union enraged Tehran last month when it agreed to slap a ban on Iran’s oil from July 1.

On Sunday, Iran announced a retaliatory halt in oil sales to French and British companies, a largely symbolic step as oil sales to the two countries were already greatly reduced.  Top buyer China will import less oil from Iran this year, while European companies are also cutting purchases ahead of a July 1st embargo by the European Union.

EURUSD rose to a 12-day high of 1.3292 in the immediate knee-jerk reaction to the news but faded by the time the European trading session got underway, with euro easing down to 1.3197. Investors were concerned about how Greece would implement the harsh austerity measures that they have been pressured to agree upon in order to be approved for additional aid from its European partners and the International Monetary Fund. EURJPY fell off a three-month high of 105.99 to 105.10.

Although the second bailout approval does remove short-term uncertainty, implementation may prove to be far more difficult and there will be new stumbling blocks ahead, one being the prospect of elections in Greece in April. Scepticism for now will prevent the euro breaking past key resistance levels at $1.33 and may be range bound until the focus turns to the European Central Bank’s LTRO (long-term refinancing operation) next week. The central bank is expected to inject more cheap funds into the system. This raises concerns on the longer-term risks to the euro, so some selling pressure is expected ahead of the ECB move.

GBPUSD fell off a London session high of 1.5864 to 1.5771.   Analysts played down some good UK economic data showing UK public sector finance data for January having the biggest monthly surplus in four years and was far better than forecast. Sterling has been driven by non-domestic fundamentals and mainly affected by news from Greece recently.

The initial risk-on sentiment from the Greek bailout news failed to sustain risk sensitive currencies like the Australian and Canadian dollars which soon gave up gains. AUDUSD fell to 1.0653 from 1.0745 and USDCAD rose to 0.9974 from 0.9927.

USDJPY eased down to 79.61 from the European session high of 79.84 on profit taking.