The Euro and commodity currencies like the Australian dollar rose early in Asia on Wednesday, having staged a rebound as investors renewed buying after a mild shake-out of stretched long positions at the beginning of the week. Markets calmed down on after being rattled on Monday by Standard and Poor’s warning on US credit ratings and on concerns of Greece debt restructuring.
Investors sold the yen against a range of currencies, helping drive the euro, Australian and New Zealand currencies up around 0.4 percent on the day. This showed investors continue to favour higher-yielding currencies at the expense of the dollar and yen.
BNY Mellon analyst, Samarjit Shankar, reported that the bank’s flow indicators showed the Euro was the strongest net bought currency among the G10 as its decline earlier this week gave the market better re-entry levels.
Data released from Germany and France highlighting business activity in those economies, indicated that they continued to outpace the rest of the common currency bloc. However, the peripherals are kept alive by rate hike expectations by the European Central Bank.
“This has also buoyed the single currency despite the lingering sovereign debt crisis in the region’s peripheral markets,” Shankar added.
The Euro last hit a high of USD1.4412 in the Asian session, having bounced off a two-week low around USD1.4156 set on Monday. Buying momentum gathered pace after stops were triggered following the break of Tuesday’s high around USD1.4351.
Against the yen, the Euro rose to 119.25 from Monday’s trough of 116.46.
Meanwhile, the Aussie was up against the Yen, hitting as high as 87. 56 in Asian trading, well off Monday’s low of 85.94.
Despite Euro’s rise, BNP Paribas analysts warned they see the risk for the market to square up very short dollar and yen positions in the lead-up to the Easter holidays.
Media reports suggesting the Bank of Japan will not take further easing actions at its end April meeting could also inhibit any early extension of Yen weakness, they added.
