By: Barbara Zigah
The Euro received a major lift yesterday following the announcement that the major central banks would coordinate efforts to ensure that there would be no dearth of global liquidity as a result of the ongoing Eurozone crisis. Following the 1-week peak of $1.3533 struck yesterday, the Euro is now, as of 11:50 a.m. (JST) holding steady at around $1.3462. As the year end approaches, one trader said that they expect to see some more short covering, and perhaps a rise toward $1.3600.
However, most market players don’t expect the rally to be sustainable, as it is recognized that the efforts – as welcome as they may be – doesn’t treat the cause, and only eases the symptoms of financial stress. Markets are still waiting for some definitive answer to the crisis, but there clearly won’t be one forthcoming in the immediate term, with the European Union’s finance ministers saying that they were imposing a 10-day moratorium on any financial decisions and would then respond to the crisis.
Other commodity-linked currencies also benefited, including the Australian dollar which surged 2.8% on Wednesday. The news that China had cut its commercial lending reserve requirements, the first such move in three years, also helped to give the Australian Dollar a boost. In trading today, the Aussie has given back some initial gains, and is now trading 0.7% lower at $1.0209.