The action has already started as we approach the last week of the month and the end of the third quarter. The Dollar has started to give up some of its recent gains which have been driven by a rally in Asian stocks and a demand for commodities. Although I am still looking for EUR/USD to continue a slow descent over the coming months, this week could see a bounce back and some small short term gains for the Euro. Undoubtedly we will see some squaring of positions and profit taking which could cause some strong volatility.
Interest seems to be growing in the recent strength of the Japanese Yen as the currency has strengthened to levels not really sustainable for Japans already fragile economy. It will be very interesting to see how the Yen behaves this week as during the course of this month it has gained 6.1% against the Euro this month, the most in a single month since May 2010. In terms of the overall rate the Yen hit 101.94 against the Euro which is the lowest level it has seen since June 2001.
The Euro is still the big talking point and concern of the markets as speculation about interest rate reductions and the future of the single currency just keep adding fuel to fire. This hasn’t helped the Euro as both Spain and Italy prepare to sell short term government debt bonds to provide capital to avoid a debt crisis.
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