EURCHF hit a seven week high as the safe haven Swiss franc weakened on increasing risk appetite due to easing concerns regarding the euro zone sovereign debt crisis after news of the second and third largest Greek banks merging together. The euro franc cross also weakened due to speculation Swiss policy makers will introduce new steps to curb franc strength and local banks may start charging customers for franc deposits to prevent hoarding. Risk appetite has been up since Friday after Federal Reserve Chairman Bernanke said last week the U.S. economy is not in such a bad position to to warrant immediate additional stimulus. EURCHF hit 1.1970 in the U.S. session while USDCHF rose to 0.8239.
EURUSD rose as the euro climbed against the U.S. dollar in the session to bounce off an early low of 1.4485 to hit a session high at 1.4546 as concerns regarding the sovereign debt crisis eased following news of a merger between two major Greek banks, Eurobank and Alpha Bank. The Athens Stocks Exchange index jumped the most in 21 years. The merger deal suggested Europe was taking steps in the right direction to deal with its financial problems. Meanwhile, risk appetite was further boosted on better than expected U.S. consumer spending for July which gave evidence the economy was not heading back into recession.
GBPUSD had light trading volumes due to the U.K. bank holiday but there was a sharp spike up to 1.6452 on news of the two big Greek banks merging, boosting risk appetite.
USDCAD touched a three-week low as stocks and commodities such as crude oil gained on speculation of recovery in the U.S. resuming after better than expected U.S. personal consumption data today. Positive economic news from south of the border spills over to Canada since the U.S. is Canada’s biggest trade partner, where three quarters of Canadian exports go to. USDCAD touched a session low of 0.9738 before rebounding.
The Australian dollar climbed to its strongest level in almost four weeks as stocks gained on speculation the global economy will recover, buoying demand for higher-yielding assets. Also data due on Tuesday on Australian building approvals are forecast to show an increase in July for the first time in four months. The aussie is also supported by lower expectations for a rate, and Bernanke’s comments last week have improved risk appetite for risk and commodity-linked currencies. AUDUSD peaked at 1.0642 in the U.S. session.
USDJPY surged to 77.00 from a low of 76.61as risk appetite was boosted on good U.S. consumption data and good news from Europe on Greek bank mergers, thereby increasing speculation of theglobal economy avoiding a return to recession. This reduced demand for safe havens like the yen.Meanwhile Japanese finance minister Noda’s victory to prime minister will ensure a smooth continuation of Japan’s measures against the yen’s appreciation. Noda recently gave repeated warnings of intervention in the FX markets to curb yen strength if necessary.
Gold fell as risk appetite reduced demand to protect investments. Bernanke’s speech on Friday at Jackson Hole gave the market a little bit of calm and confidence. Spot gold fell to $1,778.57 from an early session high of $1,822.32.