Forex Asia Review – Euro holds on to gains ahead of vote, AUD and JPY off lows

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The Euro extended gains to rise against the Dollar, climbing to 1.4328 well off its lows reached on Monday at 1.4101. Optimism is growing ahead of the Greek parliament vote scheduled for Wednesday, on passing austerity measures that will allow Greece to receive further financial aid to prevent default. A proposal by France for a solution for banks holding Greek debt to be able to roll over maturing Greek bonds and swap them for new long-term bonds, was widely accepted. This helped boost the Euro.

Sterling opened the session at 1.5984 against the Dollar and looked promising rising to 1.6001 but remained in a range before closing down at 1.5967. Meanwhile the Euro extended gains against the Pound, rising early in the session to 0.8957 from 0.8933 then settling into a range. Investors are awaiting the outcome of the Greek austerity vote tomorrow, which broadly helped lift the Euro as optimism builds. However, gains were capped as there is some caution, as many of the investors going long are only short-term buyers.

The Yen gained against the Dollar after falling for two straight days, helped by better than expected Retail sales which indicate that the Japanese economy could be slowly recovering from its slump caused by the devastating earthquake in March. Japanese Retail sales fell in May but at a slower rate than the previous month, falling by 1.3 percent versus 4.8 percent, and declining much less than forecast at 2.6 percent. USD edged down to 80.71 from 80.91.

The Australian Dollar rebounded from its two month lows against the US Dollar lifted by sovereign buying on dips. Investors increased their demand for the Aussie to buy it up while its low in order to profit from the high yielding currency. AUDUSD was lifted as high as 1.0478 from 1.0438. Recently the Reserve Bank of Australia (RBA) kept interest rates unchanged and will likely do so for some time. This weighed down the AUD, as well as falling commodity prices in the past week.

Gold moved off its month lows and managed to break past the critical $1,500 level to hit $1,501.03 and settled around those levels throughout the Asian session. Some investors are turning to the precious metal as a safer investment as nerves start getting jittery ahead of the Greek austerity vote tomorrow.

Note: Daylight Saving Time is in effect for GMT