Euro Rebounds On Improved Risk Appetite

The single currency advanced in New York morning due to the rally in European equities as early release of upbeat German Zew economic sentiment index showed the European economy is recovering from the bottom.

Earlier in Asia, euro edged higher from Asian low at 1.3339 to 1.3360 before retreating to 1.3334 in European morning. Despite a brief but strong bounce to 1.3374 after the release of stronger-than-expected German Zew economic sentiment index (48.2 versus the forecast of 35.0), price swiftly dropped to 1.3329 before climbing to session highs of 1.3396 in New York afternoon on risk appetite due to the rally in European equities.

FTSE-100, CAC-40 and DAX were up by 0.96%, 1.88% and 1.62% respectively.

Versus the Japanese yen, the greenback fell initially to 93.68 in Australia due to the yen-supportive comments from Japan Finance Minister Taro Aso. The pair staged a recovery to 93.92/93 in Asia but active cross buying of yen versus euro pressured price to 93.36 in Europe. Later, dollar's broad-based weakness sent the pair further lower to 93.30 in New York afternoon.

Japan Finance Minister Taro Aso said the government has no intention of buying foreign bonds through a public-private fund. When asked if such a fund is planned, he told reporters in Tokyo 'We don't intend to buy foreign bonds.' He also said that the government is not considering any immediate change to the law governing the Bank of Japan.

Although cable rose from Asian low at 1.5461 to 1.5505 in European morning, the pound fell in tandem with euro to 1.5453 in New York morning, later, active cross buying in euro versus sterling pressured the pound sharply lower and cable fell below Monday's low at 1.5438 to a fresh 7-month low at 1.5414 at U.S. midday before stabilising.

In other news, the Bank of Japan released its January meeting minutes which stated that 'a few members said buying JGBs with 5 years until maturity under asset buying programme could be an option; a few members said more time was needed to discuss how government, BOJ should coordinate on policies; government representative said BOJ held accountable to explain its monetary policies at government's econ council regularly; Sato, Kiuchi said target 2% CPI would not heighten public price expectations that much.'

Data to be released on Wednesday :

Westpac leading economic index; Japan Export, Import, Trade balance (JPY), All industry index, Germany CPI final, HICP final, PPI, France business climate, CPI, CPI, Italy industrial orders, EU Consumer confidence, U.K. Claimant count, ILO unemployment rate, Avg. earnings, Swiss ZEW index, U.S. Housing starts, Building permits, PPI, PPI core, Redbook retail sales on Wednesday.