Euro extended its advance against the dollar going into the Asian session, amid risk on ahead of the European finance ministers later today. There is optimism that the European leaders will agree on bolstering the euro zone rescue fund by allowing the EFSF and ESM (European Financial Stability Facility and the European Stability Mechanism) to run in parallel after German Chancellor Angela Merkel said earlier this week that she would back such a plan. This would create a fund of almost one trillion euros.
EURUSD opened in Asia at 1.3300 and climbed to 1.3358. The euro is expected to remain bullish if German economic data due today come in strong. The forecast shows February retail sales in the euro zone’s largest economy increased.
GBPUSD opened in Asia at 1.5955 and tracked higher to 1.5987 on upbeat market sentiment.
Yen held firm in Asian trading hours due to financial year end flows even at this late stage. Japanese companies financial year ends on March 31 so many are repatriating yen and selling off foreign currencies to rebalance their books. Yen was also boosted by strong economic data that showed squaring Japan’s PMI for March was surprisingly strong at a 7-month high of 51.1, while household spending was also upbeat. USDJPY had managed to climb to 82.49 in early session trading but dropped under selling pressure to 81.82. EURJPY spiked down at one point to 109.02 from 109.75.
AUDUSD moved off two-month lows it reached in the North American session and edged back up to reclaim some losses against the dollar, peaking at 1.0412. The aussie fell sharply all week on concerns of slowing China growth, which affected commodity prices. The AUD is a commodity-linked currency and China is Australia’s major trading partner. The focus is now on China’s purchasing managers’ index, due on Sunday. The forecast is for a reading of 50.8, slightly under February’s 51. Fears that data would show a slowing manufacturing sector would weigh on commodity currencies.