Forex News Review – Euro under pressure as Italian bond yields surge; gold gains

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EURUSD remains under pressure in a risk off environment that is still focused on European headlines, particularly from Italy. A debt default in Italy would be a far greater risk to the euro zone than Greece because it is the third largest economy in the region. Yields on 10-year bonds hit 14-year highs today close to 7 percent. Italian debt levels exceed the total borrowing of Spain, Portugal, Ireland and Greece combined.Investors are waiting to see if Italian PM Berlusconi will resign, as this would be euro-positive. EURUSD closed at 1.3780 after a choppy trading day.

 

Sterling held on to gains against the broadly weaker euro today, with EURGBP hovering at 0.8580. GBPUSD was range bound between 1.6005-1.6077.

 

The Swiss franc extended losses against both the euro and the dollar amid speculation the Swiss National Bank may raise its target for the floor for the euro’s rate against the franc. The central bank on September 6 imposed a cap of 1.20 francs per euro in an effort to curb franc strength after it surged to record levels, threatening Swiss exports. The SNB chairman suggested the franc was still overvalued. EURCHF rose 1.3 percent today peaking at 1.2417 in the North American session, and USDCHF gained 1.8 percent on the day to hit a high of 0.9028.

 

USDJPY has been drifting lower since Friday to touch 77.97 in US trading. EURJPY was volatile as movement depended on headline news from Europe which kept changing frequently throughout the day. EURJPY opened Ney York at 107.30 and closed at 107.55 with a lot of see-saw action in between.

 

The Canadian dollar gained as crude oil, the nation’s biggest export, rose by 2 percent in the US trading session. The loonie strengthened 0.4 percent against the greenback as USDCAD fell to a low of 1.0122 from 1.0175.

 

Gold continued to rise in New York trading to hit fresh six-week highs, peaking at $1,795.31, the highest since September 21. Debt troubles in the euro zone sparked demand for the safe haven asset. The precious metal has gained over 6.8 percent in just a week.