Forex Asia Review – Euro recovers but fragile ahead of German vote on rescue fund

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EURUSD opened Asia at 1.3541 after a huge sell off in the previous session in New York when all markets, including stocks and commodities were down. Risk aversion was increased after US Fed chairman Bernanke’s speech on a grim outlook for the US economy, but hinted the Fed would only act if deflation pressures emerged. EURUSD was bought on the dips by bargain hunters and short covering which helped lift the pair to 1.3637. The focus turns to the German vote on expanding the EFSF powers later today.

 

 
GBPUSD opened in Asia at 1.5567 after falling during the US afternoon on dampened sentiment as a jittery markets sold off risk. The pair soon pushed higher as the Asian session progressed and Asian bourses steadied. Cable end up at 1.5645 to gain over 100 pips. EURGBP tried to make up for losses from the previous session and moved higher in Asia to peak at 0.8719 from 0.8694.

 

 

USDJPY range became narrower in Asian trading today. Despite weak Japanese retail sales the dollar was steady against the yen because investors are being cautious not to let yen gain for fear of a Bank of Japan intervention ahead of the end of their financial half-year. USDJPY opened at 76.57 and closed at 76.54. EURJPY fell in early session trading to reach 103.30 but was soon lifted by bargain buying on the dip and overall euro recovery to bring the pair to a high of 104.30.

 

The Australian dollar suffered big losses during the US session and early in Asia, weighed down by weaker commodities and gold. Australia is a major gold exporter. AUDUSD fell to a low of 0.9700 but soon bounced on short covering to 0.9817 as the mood was slightly lifted although cautious ahead of a crucial vote in Germany on the EFSF rescue fund.

 

Spot gold continued its decline into Asia, as a stronger dollar weighed on dollar-denominated commodities. Gold fell to $1,1582.85 but rebounded to $1,626.23 by the end of the session. Investors are being cautious until there is a clearer picture on the European debt crisis, and are focused to the German vote today on expanding the EU bailout fund.