The risk-on sentiments in financial markets continue as we’re entering into US session. European equity indices are broadly higher after EU leaders agreed on the so called fiscal compact. Also, investors seem to be optimistic that Greek PSI situation would be resolved soon. US futures also point to higher opens. Dollar is seen broadly lower following risk appetite with dollar index back below 79 level. Sterling and Canadian dollar took out recent resistance against the greenback but Euro and Aussie, despite to rebound, is held in near term range. Italian and Spanish yields are both lower as bonds rebound. However, Portugal yields are hovering near record high, including two-year, five-year and 10-year bonds. There are continuous talk of second bailout for Portugal. Prime Minister Coelho tried to convince … Read entire article »

By: Barbara Zigah The Euro appears to be approaching a key test level as news that the Greek government is close to clinching a deal with its private bondholders helped to boost the common currency. The U.S. Dollar meanwhile continues to soften after last week’s Federal Reserve announcement which committed the central bank to an extended period of ultra low interest rates. The U.S. Dollar Index, used to gauge the greenback’s relative strength against other major currencies, fell to 78.883 .DXY, a decline of 0.4%. As reported at 12:50 p.m. (JST) in Tokyo, the Euro was trading against the U.S. dollar at $1.3187, a gain of 0.3% and edging closer to the 6-week high struck last week on the EBS trading platform. One forex strategist said that the near term direction for … Read entire article »

Dollar is back under some pressure as risk markets recovered from Monday’s selloff. DOW staged an impressive rebound from intraday low of 12529 to close at 12653, just down -0.05%. Asian indices are seen generally higher as markets find some bids. After the EU summit, 25 of 27 EU countries agreed to the so called fiscal compact. Only UK and Czech Republic, which are not Eurozone states, refused to sign the compact in March. ECB President hailed the agree as the first step towards a “fiscal union” and will “strengthen confidence in the Euro area”. Also, EU leaders agreed that the EUR 500b permanent rescue fund, the European Stability Mechanism will be operational in July, a year ahead of planned. However, the issue on raising the ESM/EFSF ceiling was not … Read entire article »

Euro extends its broad based pull back as it’s looking unlikely that Greece would agree on anything solid today ahead of the EU summit and the negotiation would possibly drag on for at least a few more days. Meanwhile, Greek Finance minister Venizelos firmly rejected Germany’s proposal for EU to take control over Greece’s budget on national sovereignty. Risk markets are also facing some pressure from selloff in European banks stocks. Dollar index managed to recover but after all it’s still staying well below 80 psychological level. US equities are set to open lower today and DOW is expected to extend it’s pull back after failing 12876 key resistance last week. Bank stocks led European markets lower after French President Sarkozy said that France will unilaterally impose a 0.1% … Read entire article »

The dovish January FOMC statement thrilled investors and boosted higher-yield currencies. Australian dollar was one of the beneficiaries. AUD soared against USD after the Fed pushed back the first expected rate hike to late-2014, from mid-2013 as projected in previous statements. Moreover, renewed speculations on QE3 have boosted AUD as well as other cyclical currencies. Australian dollar is expected to rise further in the near-term amid rising likelihood of monetary easing. In the medium- term, AUD will likely trade sub-parity against the USD but upside risks remain there for the commodity currency and any accommodative policy from China should help push the currency higher. Australia’s GDP grew +1.0% in 3Q11, after gaining an upwardly revised +1.4% the second quarter. The country’s job market softened in the second half of the year. … Read entire article »

By: Barbara Zigah After the strongest 1-week rally for the Euro in more than three months, the common currency eased back from a 6-week peak against the U.S. Dollar in the Asian trading session. Investors will return their attention back to the Eurozone, specifically Greece, for their official response to the suggestion by the IMF that they should relinquish budget policy control. Knee jerk reaction from Greece’s policymakers was peevish, to say the least, with the Finance Minister insisting that the country was “perfectly capable.” As reported at 11:19 a.m. (JST) in Tokyo, the Euro slipped to $1.3178, a loss of 0.3% following a week which saw gains for the common currency of nearly 3%. Analysts expect any support to wane, as the underlying factors remain in place to bear more … Read entire article »

Risk appetite retreats mildly as the week starts in response to Fitch’s downgrade of some Eurozone countries and as traders await the first EU summit in 2012 in Brussels. EU leaders are expected to sign off the permanent bailout fund, the European Stability Mechanism or ESM, today. The EUR 500b permanent will become operational in July, a year ahead of originally planned, replacing the temporary European Financial Stability Facility or EFSF. European leaders are also expected to discuss and possibly agree on the terms of the so called fiscal compact, which would tightening budget rules. The principles of the fiscal compact were agreed back in December but UK refused to participate. The current unused funds from EUR’s 2007-2013 budget, at around EUR 20b, would also be redirected to revive … Read entire article »

Dollar was sold off broadly after Fed extended the pledge to keep rates at historical low till late 2014 following the FOMC meeting. Risk appetite was given a strong boost and sent DOW to as high as 12841 just a few dozens points below last year’s high of 12876. However, risk rally then lost momentum, facing profit taking and as sentiments were cooled by disappointing US GDP data. The development thus limited commodity currencies’ rally and AUD/USD and USD/CAD turned sideway towards the end of the week. Meanwhile, Euro and Swissy were surprisingly the biggest winners last week even though the Greece PSI talks dragged on. European majors would likely extend current rebound against dollar in near term as pull back in stocks would likely limit strength in Aussie … Read entire article »

Yen continues to strength in early US session in otherwise ranging market as risk rally pulls back following GDP disappointment. Q4 GDP in US showed 2.8% annualized growth, strongest pace in 1.5 years but missed expectation of 3.0%. DOW opened lower today and remains pressured at the time of writing. USD/JPY dips further to as low as 76.76 so far while GBP/JPY is also heading back to 120 level. As noted in prior reports, DOW is facing strong resistance from 2011 high at 12876 and is vulnerable for a pull back after the rally since December. When that happens, USD/JPY could possibly be dragged below key near term support of 76.55. Euro is relatively steady after solid Italian bill auction. Italy sold EUR 11b of six-month bills today at yield … Read entire article »

By: Barbara Zigah The Japanese Yen, which had fallen to a one-month low earlier this week, edged higher against the U.S. Dollar helped by exporters’ month-end buying spree. The Euro also held onto the recent gains made against the U.S. Dollar, the aftereffect of the Fed’s commitment to keep interest rates near zero through 2014. Following the Fed’s announcement on Wednesday night, the Euro rose to a 5-week high against the greenback, as markets were generally taken by surprise by the Fed’s posturing, as well as a decidedly dovish leaning. Analysts expects that the U.S. Dollar might see some more selling but the underlying problems in the Eurozone will, sooner rather than later, put pressure back on the Euro. As reported at 12:09 a.m. (JST) in Tokyo, the U.S. Dollar slipped to … Read entire article »