By: Barbara Zigah

After a brief rally triggered by a late rise on Wall Street, the Euro which had struck $1.3355, is now back under pressure in Asian trading, and edging toward a 10-month low against the U.S. Dollar. Chart levels suggest that the heavy sell-off could be easing, however. As reported at 12:40 p.m. (JST) in Tokyo, the Euro slipped to $1.3282, a decline of 0.5% and close to the $1.3145 low struck during the previous trading day. More recently, the EUR/USD pair was trading at 1.3304.

On Tuesday, European finance ministers reached an agreement to safeguard Eurozone banks, even as speculation mounts that the likelihood of a second Greek bailout is evaporating. Making the fragile situation even more tenuous, Moody’s credit rating agency downgraded Italy’s sovereign debt by three notches to Aa2, and warned that further downgrades could be warranted. While not unexpected as it follows a similar downgrade by S&P, the issue underscores the need for quick and comprehensive resolution to the various fiscal problems by the Eurozone policymakers.

In the United States, the chairman of the U.S. Federal Reserve helped to lift risk sentiment when he said that the Fed was ready to take additional steps to aid the fragile U.S. recovery.