Euro Strengthens Ahead of Italian Auction

By TraderVox.com

Tradervox (Dublin) – The euro has strengthened against the yen as investors prepare to participate in the Italian bond auction that is eagerly being watched by analysts as well as forex traders. Market analysts are claiming that if this bond auction fails to satisfy market expectations, there is like to be a move from the euro.

The euro has, however, increased against the yen as Spanish bonds increased after a European Central Bank member indicated that it might buy the nation’s debt to reduce the nation’s borrowing cost. Further, the increase of the euro was as a result of comments from Bank of Japan Governor indicating that the bank is pursuing a “powerful easing” process to avoid deflation.

The 17-nation currency gained against the dollar after Italy sold 11 billion Euros worth of bills while the yen weakened against 16 major currencies. The dollar declined as the Fed prepared to release the Beige Book regional Business survey. According to Brian Kim who is a Currency Strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut, the euro seems to recover as the sovereign debt risk eases but indicated that the market is concerned about the peripheral spread which is widening.

The euro had fallen against the yen, but it has advanced slightly by 0.5 percent to settle at 106.04 yesterday during the New York session. It had earlier fallen to 105.45 yen which is the lowest it has been since February 22. The 17-nation currency advanced by 0.2 percent against the dollar to trade at $1.3110 after it had declined to 1.3033 on Monday this is the lowest it has been since March 15.

Positive signs from Europe are encouraging the uptake of the euro as investors speculate that the ECB will do everything possible to protect Italy and Spain debts. The performance of Spain and Italy is being keenly followed by traders for signs of debt crisis.

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