By: Barbara Zigah
In Asian trading, the Euro held onto Monday’s gains as hope for a comprehensive Eurozone debt plan continues to gain momentum. The common currency had surged 2% against the U.S. Dollar on Monday, the largest daily percentile gain in more than a year, though slipped back 0.1% in Tuesday trade to $1.3629. At 5:40 a.m. (GMT), the EUR/USD pair is trading at $1.3641. Analysts expect that the Euro could see further short term gains given a build-up of Euro positions; however any sustained rally is unlikely.
Monday’s rally came on the heels of a weekend pledge by leaders from Germany and France that they would do whatever is deemed necessary to recapitalize the Eurozone’s financial sector.
Yesterday’s rescue of the failed Belgian bank, Dexia, by France, Luxembourg and Belgium which includes a nationalized buyout of the bank and some €90 billion in guarantees, appears to confirm the governments’ commitments. Dealers said that they were surprised by the strong sentiment in the market, given past disappointments. One forex strategist in London doesn’t believe that the Eurozone policymakers have the political will to do what needs being done, and expects to see a Euro sell-off in the $1.365 to $1.385 range.