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Asian Session – Dollar eases after yesterday’s rally; euro awaiting outcome of another Eurogroup meeting

The dollar eased back in Wednesday’s Asian session after rising to a one-week high one on Tuesday. The greenback was given a boost from hawkish comments made by Fed governor Jerome Powell in an interview for the Wall Street Journal. Powell said there’s a 50-50 chance that the economy would strengthen in the second half of the year and if that was realized, then the first increase would come in September. This would be followed by a second hike in December according his own forecasts.

There were no surprises in the Bank of Japan’s latest meeting minutes as monetary policy was kept unchanged. But the BoJ said that its quantitative and qualitative monetary easing has been “exerting its intended effects” and that they will maintain this policy as long as necessary for inflation to reach the 2% target. Japanese shares were encouraged by this reassurance despite doubts whether the BoJ will be able to achieve its target by 2016. The Nikkei 225 index closed at its highest level since 1996 with other Asian indices also moving broadly higher.

Meanwhile, European equities continued to benefit on optimism that a deal will be reached this week between Greece and its creditors. The Greek prime minister Alexis Tsipras is due to hold a meeting today with ECB president Mario Draghi, IMF head Christine Lagarde and EC president Jean-Claude Juncker to discuss the latest proposal. Another meeting between Eurogroup finance ministers is scheduled after that. The latest proposals included phasing out early retirement, raising VAT on some categories and a one-off levy on businesses with a net income of over 500,000 euros.

In the currency markets, the euro attempted to recover some of yesterday’s losses, rising to 1.1203 against the dollar in late Asian trading. But against the pound, it continued to head lower, falling to 0.7091. The dollar was firmer against the yen, rising to 123.98 but was weaker against the pound with cable rising to 1.5790.

Coming up later in the day, the main data investors will be watching out for are the German IFO Business index and third estimate of US first quarter GDP.

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