By: Barbara Zigah

In Asian trading, the Euro held overnight gains following the largest single day rally for the common currency in almost two months, driven by whetted risk appetite and short covering. As reported at 2:39 p.m., the Euro was trading against the U.S. Dollar at 1.3029, retreating from Tuesday’s high of $1.3076, a gain of nearly 0.9%. Analysts say that a break above $1.3075, the 21-day moving average, could see the Euro rise toward $1.3200, the high on December 21. The Australian Dollar also got a boost, bouncing back against the U.S. Dollar toward $1.0400. Also providing some support to risk appetite was an unexpectedly positive manufacturing report from the U.S. and news that the Federal Reserve intends to provide forecasts on interest rate direction beginning this month.

The U.S. Dollar Index, a gauge of the greenback’s strength relative to a weighted basket of major currencies, slipped to a 2-week low, trading at 79.518 .DXY.

Despite the rally, most analysts agree that the Euro remains extremely vulnerable, and the focus will turn back to the Eurozone and the upcoming sovereign debt auctions beginning with the German and Portuguese auctions to be held later today.