Forex Europe Review – Euro zone debt concerns hurt euro; dollar strong on month-end demand

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EURUSD flows were dominated by quarter-end adjustments and month-end demand which supported the dollar. Euro was hurt by weak German retail sales data which showed a drop of 2.9 percent in August, the most in four years. This led EURUSD to fall to 1.3487 from 1.3559 Europe open price. Slight recovery to 1.3546 came after higher than expected euro zone inflation reading for September but soon eased off although a sharper decline was halted by late session results of Austria voting in favour of expanding the EFSF. However, overall sentiment for the euro remains negative as investors still fear a Greek debt default.

 

GBPUSD fell to a three-day low of 1.5575 in early London trading as the dollar was in demand for month-end fixing. There was a retracement to 1.5624 before another dip to 1.5558. Sterling gained against a broadly weaker euro pushing down EURGBP from 0.8688 to 0.8648 but gains were capped as the pound is under pressure due to speculation of further quantitative easing (QE), intended to boost the faltering UK economy. The focus is now on the BoE monetary policy meeting next week. More QE weakens the value of the pound.

 

USDJPY opened Europe at 76.55 and surged to 76.95 on a broadly stronger dollar which was in demand today for month-end fixing. he dollar/yen pair was also given an additional lift by renewed threats of an FX intervention after Japanese finance minister Azumi announced today the expansion the FX intervention fund by 15 trillion yen and that the BoJ will continue to monitor the currency markets in case yen strengthens to dangerous levels. However gains were capped after weak US personal spending data released late in the European session.

 

The Australian dollar slipped against the US dollar today to suffer its worst monthly performance in over two years due to mounting concerns of the European debt crisis slowing down the global economy and consequently affecting the Australasian region’s exports. This pushed investors to cut their bets on risky assets and sold off aussie against the greenback in the month-end fixing. AUDUSD opened Europe at 0.9780 and trekked down to a session low of 0.9697.