Forex Asia Review – Yen regains after higher Retail Sales data

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After a sharp drop in the previous New York session, the Euro consolidated for most of the Asian session, trading in a range, opening at 1.4368 and hitting the lowest level of 1.4329. Enlivened concerns about debt contagion in the Euro zone have put the Single Currency under pressure again, as investors memory was jolted by the Standard and Poor’s downgrade of Greece yesterday. Though fortunately Euro remains supported by a fragile Dollar bruised by the failure of the U.S. Congress to reach a deal on a budget plan.

Sterling extended losses against the Dollar overnight, following the same direction as the Euro. Cable also settled into a range after its 125 pip drop from yesterday. General risk aversion in the markets made investors stay away from pushing the Pound higher since recent U.K. economic data on GDP and factory orders gave evidence of a still sluggish British economy. GBPUSD traded the Asian session between 1.6313 and 1.6343.

The Yen regained losses made against the Dollar following better than expected June Retails Sales data. Sales rose by 1.1 percent, the best rise since November 2010, and beat expectations of a drop of 0.5 percent. USDJPY dropped after the news from 77.97 to 77.71 but remained above the four-month low of yesterday. The focus will now turn to Japanese inflation data and unemployment rate due out on Friday.

The Australian Dollar stayed close to the record highs reached against the Dollar this week. Investors had turned to the Aussie as a safer alternative currency to the U.S. Dollar during these times of crisis due to debt issues both in the U.S. and Europe. The recent rise in gold prices also have support the currency since the AUD is a commodity-linked currency. Higher than expected inflation data yesterday raised speculation of rate hike, which further propelled the Australian Dollar. AUDUSD opened Asia at 1.1012 and rose to 1.1047.

Spot gold paused from hitting record highs twice this week and investors took the opportunity to take profits. This let spot gold prices fall slightly in the New York session to consolidate into a range of $1,612.20 and $1,617.18. Gold is expected to remain supported and may climb back higher as the deadlock in U.S. debt ceiling talks continue with both Republicans and Democrats trying to reach a compromise.