Forex Asia Review – Euro higher on China policy easing and Greek bailout hopes

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Euro moved higher in Asian trading ahead of the euro zone finance ministers meeting later today in Brussels where they are expected to approve the Greek bailout plan. Also boosting risk appetite was news of China’s monetary easing. The central bank of China (PBOC) cut the required reserve ratio of banks by 50 basis points in an effort to stimulate growth and boost lending capacity. The move is expected to inject about 400 billion yuan in liquidity, potentially boosting commercial banks ability to lend more.

 

EURUSD opened in Asia with a gap up at 1.3179 from Friday’s close of 1.3137. A high of 1.3235 was hit. EURGBP also jumped higher to hit 0.8337 after opening at 0.8314.

 

News from China was positive for the Australian dollar, who is a major trading partner of China. AUDUSD opened in Asia at 1.0770 versus Friday’s New York close of 1.0702 and jumped up to a session high of 1.0814.

 

The yen was broadly weaker due to increased risk appetite decreasing demand for the safe haven Japanese currency. The dollar rose to a six-month high against the yen before erasing after failing to break strong resistance levels. USDJPY hit as high as 79.88, the highest level since August 4.

 

The euro also hit a three-month high of 105.73 yen before slipping back to around 104.92 yen, still above last Friday’s levels.     Strong risk appetite was a major blow to the low yielding yen, which was already struggling after the Bank of Japan surprised markets by easing monetary policy last week.

 

Another beneficiary of risk appetite was the British pound. GBPUSD rose to a high of 1.5878 after opening at 1.5846. Friday’s New York close was at 1.5827.

 

The ICE dollar index which measures the US dollar performance against a basket of six other global rivals, fell to 79.082 from 79.334 late in North American trading Friday.