Continued uncertainty in the European Union was once again the culprit for the demise of the Euro in early Asian trading as a report stated that China was currently reviewing whether to cut back on European investments due to the debt crisis. This news brought the EUR/USD back to the doorstep of recent four year lows as it touched 1.2153 as the session got under way. The European currency also skirted a fresh 8 ½ year low against the Japanese yen, where the pair hit levels just under 109.20 to post lows not too far out of the ballpark from Tuesday’s 108.79 low which matched a price from late 2001. The good news for the battered Euro was that these lows represented the ground floor in Asia, and the monetary unit spent the rest of the session climbing higher.

What appeared to be short covering helped to push the EUR/USD to 1.2280 by day’s end, with late session momentum fueled by news out of China that the nation will continue to invest in Europe. Risk received a nice shot in the arm from the news as well, helping spark the yen crosses to fresh session highs. EUR/JPY tapped a 110.80 high, GBP/JPY moved from 129.10 to 130.40, and the AUD/JPY cracked the 75.00 mark after an early detour to 73.65 lows. With continued concerns about the tightening of funds out of the US the Euro story should remain the same, rallies will be sold.

The AUD/USD began the morning at 0.8200 lows, and on its way to 0.8330 experienced a brief hiccup when private capital expenditures came in soft, (-0.2% vs. +2.1%). The Japanese currency was unfazed by trade balance data, but leaned toward yen strength with the pair near 90.10 heading into London.

Once again, the US has some important economic data on the docket tomorrow, with Preliminary GDP as well as Unemployment claims. Earlier today positive US data held stocks and risk firmer until the news about China brought down the house of cards. It will be interesting to see if positive US data unimpeded by risk adverse news could spark a move higher for risk currencies and equities.