By: Barbara Zigah
The Euro firmed in Asia after a volatile trading session got a boost from rumors that the Chinese government would be buying Italian sovereign debt. That rumor, though as yet unsubstantiated, came from a reliable source which said that China agreed to a significant purchase upon the request of the Italian government.
Nonetheless, pressure on the common currency continued as the aggregate of concerns in the Eurozone appear to overwhelm any positive sentiment. Most recently, following comments made by some lawmakers in Germany this past weekend, investors are considering the strong likelihood that Greece could default on their debt, and are weighing in the possibility of an orderly default.
As reported at 2:24 p.m. (JST), the Euro was trading against the U.S. Dollar at $1.3686, coming off a 7-month low struck in the previous day’s trading session. Some analysts believe that, in the short term, the Euro is oversold.
Analysts point out that the Italian bond auction to be held later in the day will be instrumental in the Euro’s pricing; weak demand will likely result in another fall of the single currency. Last week’s auction of Italian debt drew a lackluster response, resulting in the spread between Italian bonds and German bunds rising yet again.