Euro advanced for the first time in four days and opened the Asian trading session with a gap higher. An Italian newspaper reported that the International Monetary Fund is preparing a 600 billion euro loan for Italy in case the debt burden worsens. This gave investors confidence that European policy makers are taking steps to stem the debt crisis. EURUSD opened 0.6 percent higher at 1.3321 versus the close on Friday of 1.3237. However, the euro remains vulnerable since the news is only speculation at this stage since there has not been any official confirmation from the IMF itself.
The dollar weakened slightly at the start of the trading week in reaction to the report on potential aid to Italy. Also news that US Thanksgiving retail sales jumped to a record helped boost sentiment, and led the dollar index lower. The dollar index which measures the greenback against a basket of six major currencies, traded at 79.31, compared to 79.68 in late North American trading on Friday. The dollar has often retreated in the face of favourable economic data.
The British pound opened in Asia at 1.5484 against the dollar, up from the 1.5436 close on Friday and hit a session high of 1.5523.
Against the yen, the dollar fell to 77.45, down from Friday’s close of 77.69. The yen was still traded with caution though since a senior Japanese finance ministry official said Monday that Japan could conduct further intervention in the foreign-exchange market to curb yen strength. He suggested that the yen is still overvalued said there was “no reason that Japan should be regarded as a safe haven right now.
The Australian dollar moved higher in line with rising commodities after the good news over the weekend on Italy. The commodity-linked aussie opened on Monday at 0.9820 against the US dollar and climbed to 0.9886.
New Zealand dollar rose against all 16 major counterparts after Prime Minister John Key was re-elected over the weekend. This will strengthen his government push for free-market policies. NZDUSD opened higher from Friday’s close at 0.7504 versus 0.7397 and peaked at 0.7552.