Euro higher against US dollar for the second time in May; Singapore dollar recovers
The local currency is trading at $1.2675 against the US dollar.
IG Markets Singapore said:
The Singapore dollar has started a fightback against the greenback after giving up on gains since the Greek election drama started.
Having flirted with $1.28 at the end of last week the local currency has snatched back some territory lost to the US dollar and currently trades at $1.2675.
Sentiment has improved slightly after comments made by world leaders to focus on growth improved confidence among currency traders.
There has also been more positive news about Greece as political parties are equally divided on austerity versus anti-austerity raising hopes a new coalition government may choose to stay in the eurozone.
Also helping risk currencies has been the euro’s rise against the greenback and the yen as markets stabilise.
GFT meanwhile noted (for 21 May 2012 trading):
For the second time this month, the euro ended the North American trading session higher against the U.S. dollar. Considering that we are on the 21st day of the month, the fact that the EUR/USD has only enjoyed 2 days of gains illustrates just how concerned investors are about Europe.
Since the beginning of the month, the EUR/USD has lost as much as 4.5 percent of its value as speculators aggressively add to their short euro positions. The sell-off in the euro has been accompanied (although some will say caused) by a sell-off in other high beta currencies and equities.
The only silver lining is that the 2 days of gains in the euro occurred consecutively. Thanks to the rebound in stocks and the lack of newly negative news for Greece, the EUR/USD rose above 1.28 for the first time since last Tuesday.
The recovery is tenuous at best and there are no shortages of reasons for why investors will want to continue selling euros but with EUR/USD short positions at a record high according to the latest CFTC IMM data, it won’t take much to trigger a short squeeze even if the longer trend is still downwards.