Forex Market Review – EURJPY hits 2-mth high after China pledges to invest in euro zone

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Euro rebounded during the Asian session as risk appetite returned following the Chinese central bank governor Zhou Xiaochuan comments that China will continue to invest in euro zone debt and remains confident in the euro. The People’s Bank of China Governor said he believes the euro zone’s challenges can be solved and he fully supports monetary measures taken by the European Central Bank during the crisis and that China plans to streamline and expand investment in Europe.


EURUSD opened in Asia at 1.3131 and rose to a session high of 1.3183, bouncing from Tuesday low of 1.3079. EURJPY climbed to a two-month high of 103.46 from 102.85.


Gains in the euro will be limited as uncertainty still lies ahead of a European finance ministers teleconference later today to discuss a second bailout for Greece. So far not all party leaders have signed the austerity deal that was voted in the Greek parliament over the weekend and Greece still has to specify how it will cover a funding gap of 325 million euros.


The immediate reaction to news that China will get involved in the eurozone helped lift risk currencies like the Australian and New Zealand dollar and British pound. GBPUSD reached 1.5733, bouncing from a two-week low of 1.5643. Pound remains vulnerable though ahead of a Bank of England Inflation report due later today.


AUDUSD rose to 1.0754, up from a two-week low reached yesterday at 1.0627. Aussie was also boosted due to a report showing Australian consumers are showing signs of resilience despite slow global growth and Europe’s debt crisis. The Westpac consumer sentiment index advanced 4.2 percent this month from 2.4 percent. This is the highest level since November as two interest-rate cuts late last year improved households’ outlook.


The yen extended losses against the dollar as the Japanese currency was weighed down after the Bank of Japan unexpectedly expanded its asset-purchase program on Tuesday. USDJPY rose to a three and a half month high of 78.65, up from yesterday’s low of 77.35.