Euro Moves Higher on Risk Trades

Friday, 1 October 2010

The Euro closed the Asian trading session a fair amount higher against most other currencies on Friday, as risk trading dominated the session. Investors were seen lightening off on risky trades throughout the day, as more and more news filtered through the market.

As at 2:30pm JST (Japanese Standard Time) - the Euro was sitting at 1.3660 against the USD, which was a substantial increase on the close of yesterday's trade. During the session, it managed to touch a peak of 1.3680 - which is the highest print in all of 5 months. This impressive performance does not come on the back of forgetfulness of the recent debt crisis in the Eurozone area, but instead on the basis that the Eurozone is probably one of the safer areas to be investing right now.

Germany has clearly shown its dedication to the Eurozone, and it would be a fair bet that any more debt issues faced by Eurozone countries on a sovereign level will be quashed by the German supporters (i.e. the German Federal Bank).

Moving over to the USD and the JPY, the currency pair was lower at 83.47 Yen per dollar - which whilst unchanged from yesterday's midday level, is still a little too close for comfort for the likes of the Japanese central bank.

Obviously, if the Yen was to drop below 82.70 - the Japanese Foreign Ministry would be looking to take swift measures to boost the currency in the mid-term. However, many spectators also beleieve that since the last intervention almost a month ago, the bank could well have revised its outlook upwards to around 83.00 for an indication level of intervention.

In other words, the Japanese are becoming ever more hawkish on the USD, and therefore are willing and of course able to intervene at higher levels than they may have been comfortable with before.

Going in to the weekend, traders will of course be keeping an eye on the opening of the Commonwealth Games in Delhi - and will be monitoring the security situation closely to see any after-effects which might arise in the currency markets. If something does indeed go wrong at the games, as many officials, players and commentators are predicting - the implications for the likes of the USD could be dramatic.