Forex: Tuesday’s review

Yesterday the euro approached to a seven-week high against the dollar after Greece announced a better-than-expected conditions for repayment of debt, thus fueling optimism that Athens will continue to receive international assistance to avoid a possible default. Recall that Greece said it will spend 10 billion euros to buy back the bonds at a price that exceeded market expectations. Note that this news has helped to significantly reduce yields of Italian and Spanish bonds below.

The U.S. dollar weakened to a six-week low against a basket of currencies, as the uncertainty associated with the achievement of an agreement on the prevention of spending cuts and tax increases, remains.

Analysts say that the euro will hold the position until the end of the year, but they also warned that the currency could come under selling pressure in 2013 due to the deterioration in the economy in the eurozone.

The British pound fell against the dollar, as the published data from Markit Economics showed that the PMI in the UK construction sector has fallen, dropping while below 50 to 49.3, up from 50.9 in October. Note that analysts expected drop to 50.5.

The dollar index, which tracks the dollar against a basket of six currencies, fell 0.2% to 79.729, approaching with up to a six-week low at 79.612.

Note that the concern about preventing a "financial cliff" in the U.S. caused by the fall in the dollar, even though the currency acts as a safe haven in times of uncertainty. According to analysts, the dollar will remain weak due to the relatively positive developments in the euro area.

The Canadian dollar rose sharply against the U.S. dollar, which was caused by the decision of the Bank of Canada to leave interest rate unchanged.

Australian dollar at the beginning of session slightly declined as the Reserve Bank of Australia said about lowering the rate by 0.25% to reach 3.0. But in spite of this decision, which was expected for many, the exchange rate began to rise sharply. It is learned that this trend was due to the fact that some analysts predicted that the rate would be reduced by 0.5%.