Forex Market Review – Euro holds steady as dollar weakens

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The euro held onto gains against the US dollar in the North American trading session on Tuesday as risk appetite improved with rising US equity markets and a relief rally after Fitch ratings agency said today that they will unlikely downgrade France this year. German Chancellor Angela Merkel’s meeting with IMF chief Christine Lagarde that began at 2pm New York time is also providing some support for the euro amid signs European leaders are taking steps to end the debt crisis. Meanwhile, a still predominantly oversold market is continuing to prompt investors to short cover euro-dollar positions.

EURUSD rose to its highest level in a week, hitting 1.2817 early into the New York open. The euro rose for the second day, moving well off a 16-month low of 1.2665. However, the single currency remains vulnerable ahead of debt auctions by Italy and Spain later this week, and a European Central Bank meeting on Thursday.

The upbeat market sentiment caused the US dollar to weaken against most risk currencies and commodities-linked currencies. The ICE dollar index, which measures the US currency against a basket of six major currencies, slipped to 80.827 from 81.001 late Monday.

The British pound rose to 1.5496 against USD, up from 1.5458.

Against the Japanese yen, the dollar traded in a range between 76.77/89.

USDCAD fell to 1.0153 versus Monday close at 1.0228.

The Swiss franc pared some gains against the euro and dollar today, a day after SNB Chairman Philipp Hildebrand abruptly resigned in the midst of a controversy over his wife’s currency trades. The SNB said the resignation would have no impact on its policy regarding the 1.20 franc cap on the euro-Swiss franc cross. EURCHF rose to 1.2147 in the North American session versus the1.2104 low on Monday. USDCHF retained gains from Monday hitting a high of 0.9505 in New York trading on Tuesday.