Forex Market Review – Euro above $1.31 but pressured in anticipation of Greek PSI

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The euro  remained above the $1.31 level against the dollar, slightly off a three-week low of $1.3102 reached yesterday though it remains vulnerable to any news on the Greek PSI debt deal.  Risk aversion is likely to pressure the single currency given the fact that markets are waiting for the results of the PSI deal tomorrow.

Private holders of Greek bonds have until late on March 8 to accept the deal to restructure their debt holdings, which is key to enabling Greece to secure a second bailout worth 130 billion euros and meet a bond repayment due on March 20. The concerns is if fewer than 75 percent of creditors accept the offer, the deal could be off, potentially forcing Greece to default and push the euro zone into a deeper crisis.

Further dampening risk appetite was weaker-than-expected German manufacturing data. This erased early session gains in the euro. EURUSD fell to 1.3113 from an early high of 1.3163.

The worries over Greece kept the safe-haven yen buoyed. EURJPY hovered near two-week lows, touching 105.79 in European trading. USDJPY is stuck in a 80.57/93 range.

Cable is taking direction from the euro-dollar pair, pressuring GBPUSD to a session low of 1.5706, near a two-week low hit yesterday.

Growth-linked and commodity-linked currencies like the Australian dollar were hurt by the Greek debt concerns as well as a dimming global growth outlook. AUDUSD suffered a major sell-off on Tuesday. AUDUSD tumbled to a six-week low of 1.0508 early in Asian trading today, retracing slightly in European hours.

With the U.S. dollar also being perceived as a refuge, investors preferred to hold dollars and sell everything else. This also affected gold priced in USD, as the two assets usually have an inverse price relationship. Spot gold has lost around $128 in just over a week, falling to around $1,662.

A decisive factor in the dollar strength will be the much anticipated US jobs data on Friday, the non-farm payroll report. Today’s ADP non-farm employment change was better than expected, showing jobs growth in the U.S.