Concerns over euro ahead of bond sale in Italy

Published: 27 Feb at 9 AM Tags: Euro, Dollar,

Demand for the US dollar has cooled after chairman of the Federal Reserve, Ben Bernanke, made comments suggesting that the US will continue with its policy of bond buying for the foreseeable future. A bond auction in Italy is being watched closely by investors as an indication of which way the euro will go.

Recent Italian elections resulted in a political stalemate. This has caused borrowing cost for the country to increase and created a difficult environment for the upcoming auction of 10-year bonds.

The yen is currently holding its own against other currencies although it has been the worst performer so far in 2013. This is because it is widely anticipated that Japanese premier Shinzo Abe will push forward with an aggressive monetary policy at the Bank of Japan as a way of boosting the Japanese economy.

At the moment it is apparent that yen investors are caught between booking profits and building short positions. The US dollar is currently worth 91.90 yen, a loss of 0.1 per cent and the euro is trading at 120.05 yen, also a drop of 0.1 per cent.

Commodity currencies have also been affected by concerns over the euro with the Australian dollar falling slightly to $1.022. However, many analysts believe that Italy’s relatively stable fiscal position means that the political problems will not spark renewed debt crisis across the eurozone.