FOREX

The Bank of Japan revised up its economic forecast for the current fiscal year on Thursday but reiterated that it will keep monetary policy easy, with deflation likely to persist at least until early 2011. The central bank kept interest rates at 0.1 percent and held off on new policy initiatives as widely expected, in a unanimous vote.

The Australian dollar fell on Thursday, as selling by model-based funds weighed on the currency against the yen, while it took in stride data that pointed to a mild slowdown in China, rather than a deeper one as some had feared.

The Bank of Japan revised up its economic forecast for the current fiscal year on Thursday but reiterated that it will keep monetary policy easy, with deflation likely to persist at least until early 2011. The central bank kept interest rates at 0.1 percent and held off on new policy initiatives as widely expected, in a unanimous vote.

The Australian dollar jumped about 0.3 percentage point, paring earlier losses, while U.S. S&P stock futures erased earlier losses on Thursday after a series of Chinese data eased worries about a slowdown in China.

The AUD has had a relatively quiet trading session overnight and we're likely to see a similar trading pattern this morning as the local market awaits the release of a wave of Chinese data due out around lunchtime.

Consumer sentiment in Australia markedly improved rising to 11.1% the most in 13 months, following 3 months of decline.

Euro holds near 2-mth highs on easing debt concerns Resistance seen at $1.2767 and then at $1.2780 Aussie holds previous day's gains, U.S. earnings help

The Australian Dollar has opened over one US cent higher this morning and is trading above USD0.8800.

The Australian Dollar climbed to its highest level in 3 weeks overnight as equities bounced upon expectations US corporate earnings will beat estimates.

The euro rose on Tuesday after a smooth Greek treasury bill auction helped ease some concerns about Europe's debt crisis and took some of the sting out of another credit rating downgrade for Portugal. A strong start to U.S. corporate earnings season also boosted general appetite for risk, traders said, while data showing the U.S. trade deficit widened unexpectedly in May weighed on the dollar.

Greece passed its first borrowing test on Tuesday since a giant EU/IMF funding deal in May, sending bank stocks and the euro higher after it easily sold 1.625 billion euros ($2.03 billion) of 6-month T-bills. The debt-ridden country managed to get market funding at a slightly cheaper cost than the 5.0 percent it pays to borrow under the 110 billion euro loan that the European Union and International Monetary Fund put in place to calm a crisis that has shaken the euro zone.

The euro pared losses on Tuesday after a smooth Greek treasury bill auction offset the negative effects of an earlier ratings downgrade on Portugal. Greece's Public Debt Management Agency (PDMA) sold 1.625 billion euros ($2.03 billion) of 6-month T-bills on Tuesday at a cheaper cost than it pays to borrow under its 110 billion euro EU/IMF rescue fund, and marking its first debt auction since the backstop was agreed in May.

Credit rating agencies are growing impatient with Japan's inability to tackle its ballooning public debt, a task just made more difficult by the ruling party's drubbing in upper house elections at the weekend. The result means that Prime Minister Naoto Kan's ruling coalition lost its parliamentary majority so will need help from other parties to get bills, such as on tax reform, passed.

Japan faces political gridlock after the ruling party's poor showing in an election on Sunday, which could thwart efforts to curb a huge public debt and get the economy in shape, as well as putting Prime Minister Naoto Kan's job at risk. Standard & Poor's rates Japan's long-term local and foreign currency debt AA, both with a negative outlook.

The euro consolidated well below two-month peaks against the dollar on Tuesday as investors hesitated to go long on the single currency and risk large short dollar positions during the U.S. earnings season.

The AUD has opened slightly firmer this morning after some nervousness from traders yesterday ahead of the US reporting season saw the AUD move back towards USD0.8700.

Australia's dollar fell from its highest level in almost three weeks to an intraday low near 87 cents on the back of a drop in imports of iron ore and copper by China, the nation's biggest trading partner.

Fitch Ratings on Monday raised Argentina's credit ratings out of default, following the completion of a debt swap last month, but said the deal is not enough to open new financing sources for the country. Fitch assigned to Argentina's foreign-currency bonds a B rating, or five notches into junk rating, noting that the country has removed from the market more than 90 percent of the bonds it had defaulted on in 2002.

The euro fell against the dollar on Monday, pulling back from a two-month high, with investors betting recent gains were too far, too fast as upcoming results of stress tests on European banks loom. Some in the market said the euro had been knocked by a weekend German magazine report that the stress tests would include loan markdowns on German sovereign debt under certain conditions, countering reports last week that the tests would exempt German haircuts.

World stocks eased on Monday while the euro fell broadly as investors grew cautious ahead of a slew of key U.S. corporate earnings and details of tests on European banks' financial health. While second-quarter earnings are expected to come in strong, investors remained concerned about Europe's fiscal issues and the health of its financial sector ahead of the stress tests on the continent's banks.

Greece almost halved its central government budget deficit in the first six months of the year as drastic spending cuts outweighed weaker than expected tax revenues, the finance ministry said on Monday. The deficit, which does not include spending by local government and social security organisations, stood at 9.65 billion euros ($12.16 billion) from 17.9 billion euros in the same period in 2009, the ministry said in a statement.

The euro fell against the dollar on Monday, pulling back from a two-month high as concerns about the results of stress tests on European banks prompted investors to trim long positions in the single currency.

The policy deadlock in Japan resulting from the ruling party's drubbing in upper house elections raises obvious concerns for Prime Minister Naoto Kan. But the Bank of Japan should be worried too.

The euro fell against the dollar on Monday, pulling away from a two-month high as concerns about the effectiveness of stress tests on European banks prompted investors to trim long positions in the single currency.

Asia has emerged as a global economic powerhouse but is faced with policy challenges from rising capital inflows and needs to watch out for possible shocks from Europe, the IMF's chief said on Monday.

The yen eased on Monday after election results showed political uncertainty lay ahead for Japan, but the move was likely to be short-lived with attention turning the U.S. earnings season as a gauge of risk appetite.

The Aussie dollar traded within a 50 point range between 0.8725 and 0.8775 for the majority of Friday's offshore session and opens this morning towards the top end at 0.8770.

Technical weekly Analysis for EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD and AUD/USD.

A rally that pushed the euro to its highest level in more than two months stalled on Friday and the currency fell due largely to technical factors as investors took profits before the weekend. The euro rose 1.3 percent this week and touched $1.2723 earlier in the session, its highest level since early May, supported by strong German factory data, a positive U.S. jobs report and more clarity on European bank stress tests.