Euro Gains Some Ground After Japan Announces EU Bond Purchases

!! Market Brief !!
Japan joined the bandwagon along with China in planning to buy bonds
issued by EU's financial-aid funds to assist the EU region in battling
the debt crisis that led to bailouts of Ireland and Greece. Japan
plans to issue large amount of bonds late this month to raise funds
for Ireland and plans to buy more than 20% after China pledged to buy
Spanish debt last week. The EURJPY rose to 107.60 on optimism that
Japan may help to control any spreading of the crisis with Portugal in
trouble on its inability to raise adequate funds but it's not sure
whether the Euro will sustain any strength on lack of clarity on
market ability to absorb all the issued bonds.

The EURUSD rose to 1.2991 on the Japanese news and as EU worries were
slightly contained as French and German officials denied any reports
that they had pressurized Portugal to accept any bailout package. The
French said that Portugal is not in a serious situation as Ireland and
Greece were although Portugal, Spain and Italy's bond auctions could
see further actions being taken. The AUDUSD fell to 0.9821 as rising
floodwater situation has shut off many coal mines and trade surplus
narrowed to A$1.93 Billion as exports declined and may continue to
decline on the worsening flood situation and the RBA could hold off
interest rate hikes atleast till May 2011.

China's foreign exchange reserves climbed to a record $2.85 Billion in
Q4 2010, the biggest quarterly gain since 1996, increasing pressure on
the central bank to tighten policy to control inflation and liquidity
flow in the markets. The PBOC may have to raise interest rates and
bank reserve ratio along with allowing the Yuan to appreciate to
control inflation levels.

Not much in today's calendar, we only have Canadian Housing Starts, US
Wholesale Inventories and Economic Optimism while Fed's members
Plosser and Kocherlakota speak on economic outlook. Investors will be
watching the impact of the Japanese decision to aid the ailing EU
region and the Portuguese debt auctions.
Source: ActionForex.Com