After the slight relief seen earlier today, the U.S. dollar returned to gain strength against other major currencies, where the euro gave up all the gains recorded earlier today after France and Spain sold bonds on higher than expected yields, which brought pessimism back to markets, ahead of the Italian vote of confidence on the new technocratic government, and some critical fundamentals from the world's largest economy.
The U.S. dollar index (USDIX) opened the session in Asia at 78.28, and recorded a low of 78.01 but then rebounded to the upside to reach the highest at 78.46; however, returned now to trade around the opening level at 78.24.
The U.S. dollar recovered earlier losses after investors fled to low yielding currencies to avert risk, reflecting negative demand for high yielding investments and currencies, where the euro reversed to the downside after recording gains earlier as rising yields in Spain and France raised fears that the debt contagion is spreading in terms of higher yields, which could create another problem for European indebted nations that are soon will not be able to access the capital market and in case they could may not payback their mounting debt as the borrowing cost is skyrocketing.
Currencies are very volatile today and fluctuating heavily ahead of the confidence vote from the Italian Parliament on the new technocratic government, where despite speculations that the new government will pass easily through the upper and lower houses, markets are tensed and instability is seen as Monti is expected to restore some confidence and help the nation to meet their obligations and commitments; however yields on Italian bonds are unsustainable and markets are focused on how the fresh Prime Minister will deal with this issue in order to the save the euro-zone third largest economy.
The euro is currently trading around the opening level of 1.3460 against the U.S. dollar, after the EUR/USD pair fluctuated heavily between the highest at 1.3517 and the lowest recorded at 1.3421.
The euro zone released the construction output for September, which dropped further by 1.3% from 0.4% previously, while the annual index expanded by 0.4% compared with the prior expansion of 1.9%.
The sterling pound recovered the losses seen earlier after the upbeat retail sales index from the Untied Kingdom, where the monthly index improved beyond expectations by 0.6% from 0.5%, while over annual basis, the index advanced by 0.9% from 0.3% also better than expectations.
The GBP/USD pair opened the session at 1.5723 and recorded a high of 1.5790 and a low of 1.5690, and is trading in the moment around 1.5761.