Forex Asia Review – Euro rebounds against most counterparts

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The Euro bounced off the previous day low against the Dollar, reacting to positive news late in the night that Greece had reached a deal with the EU-IMF on an austerity plan that would bring it one step closer to securing much-needed financial aid. There is a question mark though on how long the Single Currency can keep up before plunging again. It is hard to judge at the end of the trading week since part of the reason the Euro’s bounce was so fast probably because there was some position unwinding ahead of the weekend. EURUSD peaked at 1.4276 versus a Thursday low of 1.4126 and steadied into a range for most of the session.

Sterling pretty much followed the same pattern as the Euro, lifting off from three-month lows around 1.5937 against the Dollar, then held steady throughout the session peaking at 1.6028, range bound. The Pound had a difficult week as it came under selling pressure following minutes of the Bank of England’s June meeting, which flagged prospects of another round of stimulus through quantitative easing (QE) and that UK interest rates are likely to remain at their record low 0.5 percent for the rest of 2011. This is in contrast to the US Fed which announced yesterday that it will not provide further quantitative easing, thereby lifting the Dollar.

The Euro also rose against the Yen, rebounding off lows of 113.83 to peak at 114.89 after news of the deal reached between IMF-EU and Greece on austerity measures. EURJPY remained rangebound during the Asian session, steadying ahead of the weekend. USDJPY was also hemmed in a tight range, trading between the open price of 80.50 and closing at 80.49. Yesterday the Dollar had peaked at 80.78, a week high against the Yen, lifted by the US Fed Chairman Ben Bernanke speech that that the Fed does not intend to add to its bond purchases after the QE2 asset purchase program ends on June 30.

The Australian Dollar bounced more than half a cent off its one month lows of 1.0454 against the greenback after sources told Reuters Greece has won the consent of EU-IMF inspectors for a new five-year austerity plan. AUDUSD peaked at 1.0548 and steadied in the Asian session. The Reserve Bank of Australia’s (RBA) Assistant Governor Philip Lowe is scheduled to speak on inflation today and markets are focusing on any clues on when rates might rise again.

Gold steadied on Friday after falling as much as 2 percent in the previous session, supported by a softer dollar as the Euro strengthened after Greece won approval for a five-year austerity plan. But with fears of a potential Greek debt default still lingering and the global economy in a patchy state, gold will remain well supported. Investors flee to gold in times of trouble as they have done consistently for a very long time. Spot gold rose to $1,525.58 versus a Thursday low of $1,512.38.

Note: Daylight Saving Time is in effect for GMT