Asian markets shook off early losses to trade mostly higher on Thursday. The upbeat sentiment in stock markets also helped lift risk appetite in the currency markets. Most risk currencies gained back earlier losses, including the euro, sterling, the Australian, New Zealand and Canadian dollars.
Earlier in the Asian session, the mood was dampened due to a dismal US trading session where late in North American trading, the US dollar and U.S. stocks dropped sharply. This was due to comments from Fitch ratings firm which warned of trouble for U.S. banks should Europe’s debt trouble worsen. Fitch Ratings said further contagion from Europe’s debt crisis will pose a risk to American banks and amid concern higher oil prices will hamper economic growth. Moody’s also gave a warning on European banks.
EURUSD opened in Asia at 1.3459 after a big sell off from the US session high of 1.3551. The markets were jittery after the warnings from the ratings agencies on US bank exposure to the eurozone debt crisis. After an early dip to 1.3420, EURUSD recovered to close up at 1.3487.
The Australian dollar gained almost 1 percent against the US dollar, as AUDUSD bounced from an Asian session low of 1.0116 to climb to 1.0020.
The dollar/yen remained steady a little changed as the danger of more intervention by the Bank of Japan kept markets wary. Dollar dipped 0.1 percent to 76.98 from the early high of 77.07. The pair has mostly been trading a range this week.
Meanwhile, the dollar is weakening due to speculation that the Federal Reserve Bank will expand its quantitative easing program to stimulate the economy through lower borrowing costs. This bond buying program results in increasing the supply of dollars in the system which ultimately weakens the value of the dollar.
The dollar fell against most of its 16 major counterparts today, ahead of Federal Reserve Bank of New York President William Dudley speech.
Dudley said last month that it’s “possible that we could do another round of quantitative easing.”