Forex Review – Dollar lower on improved risk appetite

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Most currencies were higher against the safe haven dollar due to more risk appetite as US markets were higher across the board today. Some US economic data helped improve the mood. The Federal Reserve released the Beige Book report that said the economy maintained its expansion in all 12 of the central bank’s regions. Manufacturing, hiring and retail sales showed signs of strength in the face of higher fuel prices, it said.

 

Euro was buoyed today by comments from European Central Bank Executive Board member Benoit Coeure who said earlier in the day that the ECB could use its bond purchase program to support Spain by buying its debt to reduce borrowing costs. His comments lifted EURUSD to a high of 1.3155 in European trading hours, and the pair retraced in the US session on profit taking but steady above 1.31. Meanwhile, a fall in Spanish and Italian yields also supported the euro.

 

GBPUSD traded a range between 1.5888 and 1.5931. UK trade balance data on Thursday should give sterling a clearer direction.

 

USDJPY moved off a six-week low of 80.56 hit in European trading and pared some losses to rise to 81.07 where it steadied in a range. EURJPY rose to 106.67 from 105.86. Meanwhile there is market talk that the BOJ may ease policy in its next meeting, which could put the yen back under pressure.

 

AUDUSD traded higher in the North American session, moving above 1.0290, with a high of 1.0331. The commodity-linked Aussie was lifted by higher demand for commodities as risk appetite improved. The focus turns to Australian employment data due on Thursday.

 

Oil rose over $20 on the day to a high of $103.11 due to the inventory report and rising US equity markets based on better than expected earnings for Alcoa Inc.