Forex News – Euro extends gains on optimism for progress on debt solution

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Euro was boosted by improved risk appetite following Italian newspaper report from La Stampa that suggested Italy could receive aid up to 600 billion euros from the IMF. Though the report was denied by the IMF, the euro continued to rise against the dollar to hit a high of 1.3397, up almost 1 percent from the European session open. The single currency was lifted by a relief rally after the Belgian government was able to meet its set target and sold all its bonds at an auction after its credit rating was downgraded before the weekend. Meanwhile, the focus will turn to the Eurogroup meeting this week where European officials are to discuss how to leverage the EFSF rescue fund, and French and German officials are proposing deeper European states integration.

 

The dollar weakened against most risk currencies today based on improved risk appetite. The dollar index which tracks the performance of the USD against a basket of six major currencies, dropped to 78.973 from 79.688 in the US session on Friday. The dollar is perceived as a safe haven and usually retreats in the face of favourable economic data.

 

Sterling was not affected by UK data showing that sales volumes in Britain have slumped to their lowest level since March 2009. GBPUSD took direction from EURUSD and rose against a weaker dollar to hit a high of 1.5593 from a low of 1.5457.

 

Against the Japanese yen, the dollar gained 0.5 percent on the day, soaring to a high of 77.83 yen from an Asian session low of 77.45. The euro rose 1 percent in European trading to 104.21 from 103.10.