Forex Review – Euro holds above $1.32 while Eurogroup meeting to discuss Greek bailout

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Forex Asia Review - Euro temporarily retreats from recent losses; Euro debt woes still persistEuro remained buoyed in the US session despite light volume due to US markets being closed for the President’s Day holiday this Monday. Euro zone finance ministers were holding a meeting in Brussels to discuss the Greek bailout and investor sentiment was high on expectations that additional financial aid will be approved tonight.

A deal on a 130-billion-euro rescue package to help Greece avoid a disorderly default, would finally end month of uncertainty that has caused stress in the financial markets and has weighed on the euro.

Once the agreement has been signed, Greece will be able to launch a bond swap with private investors to help reduce and restructure the country’s debts and help stabilize the economy. A Greek finance ministry source said last-minute negotiations were continuing with bank creditors on possible higher writedowns to help plug a funding gap.

There was little change in currency markets in the US session while investors wait on the sidelines for the Eurogroup meeting to finish. EURUSD reached as high as 1.3275 and remained above 1.3236. Meanwhile, EURJPY hovered near three-month highs, meeting strong resistance at 105.45.  EURGBP peaked at 0.8365, surpassing Friday’s high of 0.8335.

Risk appetite softened the safe haven US dollar against risk currencies, including euro, against the British pound, Canadian and Australian dollars. The dollar fell today after China announced cuts in reserve requirements for its banks, in an effort to stimulate growth.

The ICE dollar index which measures the dollar performance against a basket of six other major counterparts, fell to 78.973 from 79.334 late in North American trading Friday.

GBPUSD traded higher compared to Friday’s levels, hitting as high as 1.5878 today. AUDUSD hit highs of 1.0814 today while USDCAD touched lows of 0.9905, down from Friday’s high of 0.9983.

The yen weakened to a six-month low against the greenback after Japan posted its largest monthly trade deficit on record. USDJPY rose to 79.88 early Monday, the highest since August 4 last year.