Forex trading

It has been a busy final day of forex trading in January with the euro the most notable mover.


The single currency enjoyed sizeable gains in the forex market as hopes continued to grow that a restructuring deal could be reached between Greece and its creditors to tackle its debt and remove the risk of a debt default.


Significant progress


Forex trading moved quickly after the Prime Minister of Greece, Lucas Papademos, commented that negotiations over the government’s debts had made significant progress – it is now hoped there will be a decisive agreement in place before the week ends.


This news prompted the euro to increase by 0.3 per cent – reaching $1.3180, close to the $1.3235 it achieved last week, which marked a six-week high.


However, forex analysts predict that it will be tough for the euro to break through the $1.3244 level – the threshold that indicates the currency’s slide from October to the New Year. Achieving a breakthrough above this level would rely on substantial short-covering and would almost certainly need a debt restructuring deal to be reached in Greece.


It is hoped that if a deal can be reached in Greece, the euro could rise as high as $1.3500.


Dollar pressure


There was little encouragement for the US dollar however, with month-end selling appearing to be the order of the day. It hit a three-month low against the Japanese Yen as its falls continued in the aftermath of the US Federal Reserve’s declaration that it would maintain interest rates close to zero over the course of the next two and a half years.


At one point in forex trading earlier today (Tuesday, January 31), the dollar dropped to 76.175 yen – that’s well below its high of 78.288 last week. This edged it closer to the record low it dropped to against the yen last October – when it reached 75.311 yen – which prompted an intervention from the Japanese authorities.


The latest fall of the US dollar also came after Japan’s minister for finance, Jun Azumi, urged caution against another rise in the yen and spoke of firm steps being taken against speculative moves in the forex trading market. It is generally believed that the Japanese authorities are unlikely to intervene unless the dollar hits a new record low against the yen because the US Treasury was disapproving of its intervention last October.