Forex Market Review – Euro rebounds in Asia on short-covering; Aussie rises on China GDP

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The Australian dollar rose sharply helped by the better-than-expected GDP in China, which is Australia’s major trading partner.  Data showed China’s gross domestic product growth slowed slightly in the fourth quarter to 8.9%, but exceeded market expectations of 8.6%. AUDUSD opened in Asia at 1.0312 and climbed to its highest level since November 2011, hitting 1.0401.

 

The euro was lifted in Asia, primarily on short covering and then following better than expected growth data in China. EURUSD opened at 1.2664 and after a brief dip to 1.2648, rebounded to 1.2735. Late on Monday, Standard and Poor’s announced it cut the AAA rating of the EFSF, which is Europe’s bailout fund.  The euro only temporarily fell but soon recovered as market jitters calmed since the downgrades were already expected and already priced into the market. The euro is still under pressure though and investors are cautious as the Greek debt talks are still underway.

 

The improved risk sentiment pushed the safe haven US dollar lower. The ICE dollar index, which measures the greenback against a basket of six currencies, traded at 81.268 in Asia on Tuesday, compared to 81.436 in European trade on Monday.

 

The dollar fell to a low of 76.63 yen in today’s Asian session, compared to a low of 76.78 on Monday. EURJPY opened Asia at 97.22 and rose to 97.75.

 

The British pound edged up against the dollar and reached 1.5374 from 1.5309.