EURUSD was very volatile in the session, reacting to news headlines, some of them just rumours. But it goes to show how jittery the markets are and how sensitive the single currency is. By the end of the US session, euro made gains against the dollar fueled by a rally in French bank shares after they dismissed rumours that they lacked access to funds. Also earlier in the session euro was dragged down after rumours were dismissed that German Chancellor Angela Merkel and French President Nicolas Sarkozy would announce joint initiatives on the euro zone debt crisis. Overall it was a news filled day, including the European session disappointing Italian bond sale. There is a chance for brief gains since the EURUSD pair appears oversold but gains will be capped since weak sentiment rules as the underlying concerns of Greek default still exist. EURUSD climbed to a session high of 1.3738 from the open of 1.3639.
Sterling was weighed down by inflation data earlier in the day, which did not show a significant increase enough to push the Bank of England to raise rates and are bound to leave them at record lows until next year. Comments from BoE policymaker Adam Posen, who said the central bank should immediately add more monetary stimulus, further weighed on the British pound. Investors are wary of holding sterling, especially against the dollar in a risk environment and prefer the safe haven US dollar versus the riskier pound. GBPUSD fell to a US session low of 1.5771 from the session open of 1.5821. Meanwhile, EURGBP climbed to 0.8683 from the open of 0.8619.
The Canadian dollar remained above parity against the U.S. dollar as sentiment seemed to be shifting to more positive territory after a dip on Monday and early today. The uplift in the euro also helped boost the riskier commodity-linked currencies like the loonie. A rise in crude oil prices also helped boost the Canadian commodity-linked currency since Canada is an oil producer and exporter. Crude rose to US$90.50, the highest since early August. USDCAD fell to 0.9854 from 0.9962.
The yen strengthened as risk aversion earlier prompted investors to buy the currency as a refuge. It has appreciated almost 3 percent in the past week. Yen rose against the dollar as investors rush to protect their assets on concerns of a Greek default. USDJPY declined to 76.79 from the 77.00 open. EURJPY was lifted by bargain hunters who took the opportunity to buy the euro cheaper against the yen as the pair had reached close to its ten year low earlier in the day following a disappointing Italian bond sale. There is opportunity for gains since the pair was oversold earlier. EURJPY climbed to 105.54 in New York from the European session low of 104.39.
Gold extended gains in New York, rising a total of $50 a troy ounce today as higher equity markets and a rebound in the euro reversed some of the European session’s sharp drop driven by margin-call selling. Investors sold the metal earlier to gain access to liquidity in an effort to cover losses in equities since yesterday due to mounting euro zone debt concerns and a looming Greek default. As bourses moved higher, spot gold rose to $1,843.95 from the previous session low of $1,794.87.