Tuesday, 22 Mar 2011

EUR Supported by Trichet Comments

The euro remained well supported by comments from ECB President Jean-Claude Trichet and other ECB policymakers, who reiterated they were ready to act quickly to guard against inflation. Most economists expect a rate hike next month.

German two-year bond yields have risen about 30 basis points over the past week to 1.75 percent, widening the gap over U.S. Treasury yields to about 110 basis points. The euro rose as high as $1.4249, before retreating to 1.4197, down 0.2%.

Japan again warned it would act to keep the yen in check, but traders saw no action in the FX market on Tuesday from Japanese or other G7 authorities following last Friday's joint intervention. That resolve could be tested if dollar/yen looks like it will break back below 80 yen.

The dollar last traded at 80.95 yen, down marginally on the day but in the middle of the day's narrow range of 80.80-81.30 yen.