Forex Review – Euro reverses gains on Spain debt concerns

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The euro reversed earlier gains against the dollar as focus turned to concerns over the fragile Spanish economy fuelled by the collapse of the country’s fourth largest lender, Bankia. This led to surging Spanish bond yields which hit record highs near 7 percent today.

In early European trading, EURUSD hit as high as 1.2623 lifted by news over the weekend of the pro-bailout New Democratic Greek party leading in the opinion polls. The pair opened the Asian session with a gap higher for the Friday close but soon closed the gap going into the New York session, falling to 1.2524 in light trading volume due to the U.S. Memorial Day holiday.

GBPUSD was range bound between 1.5671 and 1.5715 amid thin holiday trading. EURGBP filled the gap up from the Monday open, and fell back down to 0.7982 from the day high of0.8035.

The  Swiss franc weakened against most of its major counterparts after Swiss National Bank President Thomas Jordan said controls on capital inflows are among measures being considered to curb franc strength in case the euro-zone debt crisis escalates. USDCHF reversed earlier loses and climbed to a high of 0.9594 in the U.S. session, up 0.7 percent from the day low.

Yen traded higher on Monday versus Friday as the Bank of Japan policy minutes released today suggest that the BOJ is taking a somewhat less aggressive stance toward its easing measures.  The euro extended  losses against the yen, dropping 99.49 from an earlier high of 100.02. USDJPY has lacked clear direction in a week now,  The Monday high was 79.50.

AUDUSD held above 0.9833 after rising to a high of 0.9887. Aussie was one of the biggest gainers today, bouncing off six-month lows versus the greenback.