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Euro rebounds on short-covering amid rumours of intervention
May 20 2010
The euro was able to rise almost 2 percent against the greenback on Wednesday after hitting a fresh 4-year low at 1.2144 as traders covered their short positions amid volatile trading with rumours that the ECB was looking to carry out coordinated intervention with the Fed to stop the euro's recent slide. The eur/usd recovered to 1.2385 and the eur/chf also staged a swift rally after holding above its record low of 1.4001, but the SNB refused to comment on whether it had the sold the Swiss franc.
Sterling followed the euro higher on another bout of profit taking that saw the gbp/usd bounce from a marginal low of 1.4238 to end the day up over one percent, with the pound also gaining over one percent against the yen after the cross made only a brief move below the 130.00 level. Commodity currencies such as the Australian and New Zealand dollar, however, fell sharply versus the greenback and yen on increased risk aversion and also some technical selling after major chart supports were breached. Aud/usd and nzd/usd weakened to around 0.8460 and 0.6800 respectively.
Stock markets around the globe posted losses, with European markets losing over 2 percent a day after Germany banned the short selling of selected securities. U.S. stock indices were down over half a percent with the Dow ending the day down 66 points. There was little reaction to the U.S. CPI data which showed a smaller than expected year-on-year rise.
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