With little in the way of scheduled economic data releases, currency markets took strong direction from equities overnight with the Australian dollar a major winner. The local unit broke back through the 1.05 USD mark for the first time since 27 of October 2011. A sentiment shift on the ability to private creditors to agree to Greek resulting from comments by French Finance Minister Francois Baroin helped trigger the risk-on session, as the outcome of the agreement on the write-downs weighs heavily on the near term risk in global markets. The Euro bounced making a break past the 1.30 USD, recovering all losses made in 2012 versus the US dollar. Yet shortly after the market closed in the US it was announced that the Eurozone finance ministers has rejected the first offer made by Private bondholders off the basis the coupon rate for the bonds.
Those listening to economic commentators would have heard about the use of the carry trade involving the Euro recently has been a significant benefit to risk currencies such as the Australian dollar, Brazilian Real and South Africa Rand. With those shorting the Euro post the November rate cut and able to borrow at rates of near 1% and invest in the above countries and bank a higher interest rate. The Australian dollar did however rise off the back of the French minister's statements, but is still buying 80.8 Euro cents. For traders it's about viewing how much downside risk there is. With the Europe looking down the barrel of recession this year debasing the currency value through the reduction of interest rate by the ECB looks likely to be used to limit the length of the recession.
For today's session the only key news item in the region is the Bank of Japan Monetary policy statement, with rates at the same mark for more than 3 years market participants will be looking for indication of any indication of further intervention in the Yen. The Yen has traded in the bottom the range in 2012 since the last move 1.5 yen away versus the US dollar of where it triggered intervention in October. Closer to home, European equity strength and flat US equities should help moderate the gains the Australian dollar has made in the 24 hours. The main focus will be the European reaction early this afternoon to the first rejection of agreements on the Greek bonds.