EURUSD rose to its highest level in nearly three weeks and made the biggest daily gain in over a year, gaining over 320 pips today to peak at 1.3697 in the US session. The relief rally began early today as news came out from Merkel and Sarkozy promising to deliver a before the November 3rd G20 summit that will tackle the euro zone debt crisis, including a plan to recapitalize banks and prevent contagion to the banking system. Since euro had reached oversold territory and many traders were itching to unwind positions, this helped boost euro further. Adding to strength in the euro was a German trade surplus and increase in exports in August, as well as stronger-than-expected data on French and Italian industrial production in August, which reduced fears of sharp economic pullbacks in euro zone’s second- and third-biggest economies. Meanwhile, adding to the string of good news from Europe today, collapsed Dexia bank’s Belgian division was bought by the Belgian government.
GBPUSD rose on the back of EURUSD, gaining over 160 pips on the day to hit 1.5687 as risk appetite lifted sterling and dollar was weaker due to light volumes from the US Columbus Day holiday. EURGBP climbed to a high of 0.8730 from the Asian session low of 0.8600.
The Canadian dollar strengthened against its US counterpart due to risk appetite lifting commodities. Crude rose over 3 percent today. Canada is a major oil exporter, so its currency is sensitive to moves in oil prices. There was light trading in USDCAD due to holidays in both countries. USDCAD fell to a low of 1.0250 versus the Asian open price of 1.0386.
The Australian dollar, also a commodity price sensitive currency, advanced beyond parity with the greenback to the highest level since September 22, rising to as much as $1.0013.
USDJPY traded an extremely tight range in the US session, but remained above 76.60. Against the yen, the euro rose to a session high of 104.98, the highest since September 21. Optimism that Europe “mean business” this time, based on fresh efforts to tackle the euro zone debt crisis by Germany and France, spurred investors to embrace risk and shifted away from safe havens like yen and dollar.Wall Street stocks traded 2 percent higher while safe-haven U.S. Treasuries fell.