The euro opened the US session at 1.2966 (8:00 am ET) in the midst of a small rally from 1.2940 to 1.2978 as Asian and Middle East names provided support. Most of the day's subsequent action was away from euro/usd itself. With a strong euro/yen and to a lesser extent euro/chf bolstering the pair, the euro/usd was squeezed higher from 1.2962 to 1.2995.
But dollar strength versus the yen and the better overall economic story in the United States, backed by the improved NFIB Small Business Optimism Index at 8:30 am kept the euro on the defensive. The euro was not helped by comments from the ECB's Asmussen that Germany was in danger of becoming the sick man of Europe in 5-10 years if it didn't reform. The euro weakened from 1.2960 to 1.2931 on the back of these comments but demand just below the six week low of 1.2930 bolstered the united currency and it traded back to 1.2945. The euro kept a 1.2935-45 range after that until about 10 minutes before the New York close and value date change at 5:00 pm when it suddenly dropped to 1.2912 followed by a small bounce to 1.2925.
Dollar/Yen opened the US session at 101.60 (8:00 am ET) and euro-yen at 131.70. Demand for euro/yen was strong from the start and the dollar was squeezed to 101.91 but then dropped back to trade around 101.70 for about two hours in mid-morning.
This pause gave buyers a prolonged time to buy the dollar and the euro against yen. The cross rallied over the next three hours from 131.80 to 132.77, corrections in the run were shallow and short lived. Dollar/yen was dragged higher by the upward movement in the euro/yen. It paused briefly at 102.00 and then 102.10 before breaking Friday and Monday's highs of 102.15 and moving strongly to 102.40, just short of the October 20th 2008 high of 102.41. After that short move to 102.40 the dollar/yen consolidated around 102.25, with a final lunge to 102.40 just at the 5:00 pm New York close.
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