Forex Asia Review – Dollar remains weak; Asian markets consolidate

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EURUSD consolidated gains overnight during the Asian trading session. The pair opened at 1.3356 and was capped at 1.3365, supported above 1.3342. Asian markets were reluctant to extend gains after Monday’s sharp rally into three-week highs, following U.S. Fed Chairman Ben Bernanke’s speech.

Bernanke signalled that supportive monetary policy would remain and fuelled speculation of more stimulus for the U.S. economy, based on his comments that the labour market was still weak.

Against the yen, the euro briefly advanced to 110.91 early in the session and was within easy reach of a 4-1/2 month high of 111.42 set last week.

The dollar edged up to 83.02 yen before easing back to 82.78 but still well off Friday’s trough of 81.96. Further upside is expected to be capped for now, especially due to dollar selling by Japanese exporters.

Higher yielding  currencies  had the opportunity to gain against the weaker dollar due to the yield spread. The Australian dollar has one of the highest yields in the industrialized world. AUDUSD rose to  1.0544 after Bernanke’s speech during the U.S. session, but eased on profit-taking in Asia, to 1.0502. But the aussie has moved far off from last week’s trough of 1.0335, when it fell on China growth concerns.

GBPUSD traded a tight range between 1.5956 and 1.5970 during the session.

USDCHF was little changed in Asia after the sharp tumble to 0.9021 in New York trading.