Greece is reportedly planning to amend the EU deal struck last month to bypass the IMF financial contribution due to concerns that this might come with tough conditions. In addition, Greek banks are being hit as large depositors are moving cash to other international institutions. Greece's fiscal problems are far from over and this will keep the euro under selling pressure.
The Financial Times reports that Greece intends to launch a bond in the US, will mark the first time a eurozone nation will sell itself as an emerging market as Greece looks for ways to service its problematic debt.
The dollar was supported after strong readings from the US services sector and housing market last Monday, which came just after a solid jobs report last week. The British pound lost ground against the dollar and euro, after a survey showed that in the forthcoming British elections, called by Prime Minister Gordon Brown last Tuesday, may result in no party holding parliamentary majority.
GBP/USD dropped after economic data suggested the UK economy is likely to lag behind the US. The pound fell despite the index of building activity, based on a survey of purchasing managers, increased to 53.1 from 48.5 in February. Readings over 50 indicate expansion.
Yen rebounds against euro, pound and dollar - helped by speculation that Japanese exporters took advantage of the yen's down turn to bring back overseas earnings.
Also official data showed that Japan's leading indicators index (a broad indicator of economic health) rose for an 11th consecutive month and the country is sustaining an economic recovery and deflation.
In a search for risk reduction in the global currency market, fresh fears over sovereign debt in the eurozone also helped the yen rebound against the euro.
After the US Treasury Secretary Tim Geithner declared last Saturday that his department would delay a report, due April 15, that could have labelled China a currency manipulator, again on Tuesday, China defended its currency policy, rejecting the American argument that a stronger exchange rate would erase the US trade deficit with China.
After the yuan's rise of 21 per cent in the three years before the actual financial crisis, the freezing of the yuan exchange rate around 6.83 per dollar since July 2008 helped China producers to weather the crisis.
A Foreign Ministry spokesman said China would indeed keep perfecting its "managed floating exchange rate" but would stick to the three principles it has always followed: any change must be at Beijing's initiative, the manner of the change must be controlled, and it must be gradual.
Upcoming FX Key events
Today: European Zone Retail Sales, BOE Interest Rate Decision and Asset Purchases Target and ECB Interest Rate Decision.
Tomorrow: Canada Unemployment Rate and UK PPI.
FX technical key points
EUR/USD is bearish, target 1.3000, key reversal point 1.4200
USD/JPY is bullish, target 98, key reversal point 85
GBP/USD is bearish, target 1.4750, key reversal point 1.5700
USD/CHF is bullish, target 1.1000, key reversal point 0.9950
AUD/USD is bearish, target 0.7800, key reversal point 0.9400
NZD/USD is bearish, target 0.6200, key reversal point 0.7650
Mr Bovay is senior trader at RTFX Ltd.
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