Forex Asia Review – Yen maintains gains in risk-off market; euro bounces slightly

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The yen held onto gains made yesterday against most of its major counterparts as investors turn to the safe haven asset while the market is in a risk-off environment. Greece is dominating the headlines again with growing concerns about Greece’s ability to complete a debt swap by the deadline tomorrow. A low level of participation in the PSI debt swap could reignite fears of a chaotic default.

USDJPY hovered at yesterday’s lows around 80.57 during Asian trading hours while EURJPY was close to three-month lows with euro slightly bouncing on short covering.

Euro also bounced on short-covering against the dollar, taking direction from the bounce against the euro-yen. EURUSD rose from yesterday’s big plunge of 1.3102 to 1.3149.

Any further gains are likely to be capped as the March 8 PSI deadline looms and participation in the Greek bond swap is seen falling short, giving little incentive to follow-through to the upside. The ECB interest rate announcement is also due tomorrow, giving another reason for investors to remain on the sidelines till then.

The Australian dollar touched a six-week low after GDP data showed that the Australian economy expanded by less than forecast. GDP rose 0.4 percent in the fourth quarter from the previous three months, less than the 0.7 percent expected, and lower than the previous quarter’s 0.8 percent. AUDUSD touched 1.0508, the lowest since January 25.

Elsewhere, other USD crosses retraced after yesterday’s strong dollar rally. GBPUSD opened in Asia at 1.5711 after plunging yesterday, and traded up to a high of 1.5740 on short-covering.

A broadly softer dollar in Asia led USDCHF lower to 0.9166, easing off a three-week high of 0.9195.