Forex Europe Review – Swiss, yen weaken on speculation of central bank intervention

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The euro climbed against the dollar to gain almost 90 pips in the European session, mostly lifted by higher European equity markets today. Meanwhile, the Single Currency’s strength could be merely reflecting dollar weakness based on speculation that the U.S. Fed might introduce more quantitative easing, which in the past has hurt the greenback. The markets are focusing on Fed Chairman Bernanke’s speech at an economic summit in Jackson Hole, Wyoming on Friday when he is expected to signal whether there will be a QE3. If there will be then the dollar will likely drop because the inflation picture is different this year than it was last year when QE2 was implemented and the risk of deflation is much more remote than it was last year. EURUSD opened Europe at 1.4367 and hit a high of 1.4434.

 

Sterling gained against the dollar today as investors looked for an alternative to the euro and the dollar which are looking riskier compared to the pound. Some even see the British currency almost as a safe haven and was less at risk of any central bank intervention which the Swiss Franc and Yen are under pressure of at the moment. GBPUSD opened at 1.6482 and rose to a high of 1.6519.

 

The Swiss Franc weakened against the euro and was flat against the dollar on speculation that the Swiss National Bank will be setting an exchange-rate target of at least 1.2 francs per euro. All morning the central bank was intervening in the one-month Swiss franc forward market to drive down the forward rate in an effort to deter investors from holding the Swissie. EURCHF opened at 1.1298 and rose to a high of 1.1380. USDCHF opened at 0.7863 and consolidated in a range between 0.7837 and 0.7892.

 

The yen weakened against the euro and dollar as investors speculated that Japanese authorities could soon intervene to weaken the Japanese currency. EURJPY opened Europe at 110.22 and rose to a high of 110.83 while USDCHF opened at 76.72 and hovered between 76.66 and 76.82.