Forex Asia Review – Euro remains weak after Moody’s downgrades Spanish banks

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Euro held onto losses made against the dollar on Tuesday from scepticism about the upcoming EU Summit later this week. Markets are losing hope that European leaders will agree on concrete solutions to solve the debt crisis. Sentiment was kept damp after Moody’s downgraded 28 Spanish banks yesterday. This comes after Spain formally asked for aid from the EU to help its troubled banks. Also a fifth euro zone country, Cyprus, requested a bailout yesterday to help its banks that have large exposure to Greek debt.

 

EURUSD traded near a two-week low, opening in Asia at 1.2502. Short covering lifted the pair to 1.2523 before falling back down to end the session flat.

 

GBPUSD opened in Asia at 1.5570 and edged up to 1.5586 while EURGBP ended the session flat after trading between 0.8025 and 0.8037.

 

Yen showed some vulnerability after the Japanese parliament voted for a tax bill to double consumption tax. But the safe haven currency soon regained early session losses as risk aversion helped keep its strength. USDJPY was dragged back down to 79.42 from an early high of 79.77. EURJPY fell to 99.28 from 99.87.

 

The Australian dollar edged back up to parity with the U.S. dollar during the Asian trading session but the commodity-linked currency remains weak as risk aversion shifted flows to safe havens. Short-covering and profit-taking lifted AUDUSD  from 1.0008 to 1.0032 in the session.