Forex trading

There was a major boost for the euro on the forex trading markets as it bounced back from the 16month low that was reached just days ago.

Having previously fallen to $1.2662 against the US dollar it was able to rise by 0.4 per cent to reach $1.2859 on Friday (January 13) – and this after temporarily climbing to $1.2879. So what prompted the forex fight back?

The increase for the euro against the dollar on the forex trading markets was prompted by increases in stop-loss buying, as well as hopes running high that Greece, which has been embroiled in a debt crisis, may soon be able to conclude a deal with creditors that could lead to a voluntary debt exchange.

Debt sales in both Italy and Spain surpassed expectations with Spain able to sell around twice the level of bonds that had been predicted on Thursday; and there was also strong interest in Italy’s auction with hopes high that a further sale on Friday will continue the momentum.

Meanwhile, the chief executive of Societe Generale, a French bank, told one newspaper about his strong expectations that Greece may be able to write down around half the value of its sovereign bonds. It is predicted that a deal will be reached with private creditors within a matter of days.

The euro was also boosted in forex trading by the news 24hrs earlier that the European Central Bank (ECB) would maintain existing interest rates at one per cent – highlighting that there are signs of stability in the economy.

It believes that its cheap three-year loans have aided banks and are one of the reasons why the debt auctions in Spain and Italy proved so successful.

Todd Elmer, who works as a currency strategist for Citi Bank in Singapore, told Reuters that recent liquidity provisions and monetary easing from the ECB had helped to restore some stability and reduce the risk of a euro crisis.

However, he highlighted that there are still concerns about the economy and so there is unlikely to be any sharp rebound from the single currency in the forex markets.