Forex Asia Review – Euro steadies, Australian dollar gains; focus on EcoFin meeting

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The euro eased off slightly in Asia against the dollar after surging in the prior session following the announcement of the ECB that central banks would extend three-month loans to euro-area banks based in US dollar. Euro zone banks have faced dollar funding strains in recent months on mounting fears Greece will default on its debt, hitting institutions that have large exposure to the nation. As the EURUSD pair consolidates, the focus will be on the European finance ministers meeting in Wroclaw, Poland later today to discuss the euro zone crisis. US Treasury Secretary Timothy Geithner will also be attending. EURUSD opened Asia at 1.3877 and closed down at 1.3835.

 
GBPUSD mostly tracked EURUSD moves. Cable opened in Asia at 1.5798 and fell to 1.5777 before bouncing back towards the high seen earlier to close at 1.5799. EURGBP initially consolidated, after opening at 0.8779 then move down to 0.8763 on profit taking following the bounce to a fresh one week high yesterday.

 

The Australian dollar was finally lifted against the US dollar after a week of declines. The central banks’ move to increase liquidity helped the aussie gained more than one cent. It had been under pressure this week following heavy liquidation by foreign funds of long positions in Asian currencies on growing fears another global credit crunch may be looming. AUDUSD rose to 1.0355 from a trough of 1.0293.

 

USDJPY steadied in Asia after a vigorous rally yesterday on news of USD lending facilities by major central banks. This helped the pair bounce off month lows. USDJPY opened Asia at 76.68 and moved up to 76.85.

 

The Swiss franc was little changed against the euro and the dollar, both pairs remained in an incredibly tight range as a result of the September 6 Swiss National Bank intervention in the currency markets to curb franc strength and introduced a ceiling of 1.20CHF against the euro.

 

Gold extended its decline in Asia to drop to the lowest in almost three weeks as market sentiment improved on news that European banks will have enough liquidity through year-end following an ECB plan. Also European leaders gave optimism that they support Greece and will make efforts to contain the euro zone debt crisis. This removed the precious metal’s safe-haven appeal. Spot gold fell to a low of $1,762.42 from an early Asian session high of $1,787.95.