Forex Intraday Round-up: The EUR Continues Downward Slide Ahead of German Parliament Vote

**The Euro Falls Ahead of German Vote on Greece’s Bailout**

In midday trading the euro continued its downward slide from yesterday and plunged below 1.2900 against the dollar to reach a session low of 1.2891. At 12.16 GMT the EUR/USD was changing at 1.2897/98 or 0.34 percent lower than yesterday. There was no particular report to trigger the euro sell-off today, meaning Monday’s Eurogroup decision on Greece’s fate is still feeding in through the forex markets. FXstreet.com quoted Lutz Kapowitz, an analyst at Commerzbank, for whom the slide in the pair makes sense because “no one had seriously doubted that Athens would be saved, which meant that the upside potential was limited”. Mr Kapowitz expects a struggling market ahead of Friday, when Germany will be voting on the new deal for Greece, likely to be approved.

The discussions around the US fiscal cliff are now the main worry of market participants, especially after the leader of the majority in Senate, Harry Reid, said “little progress” has been made in the negotiations. Mr Kapowitz points out that if the fiscal cliff is left untouched, the US economy will slow down considerably and possibly fall into recession.

According to Deltastock.com analyst Stoyan Mihaylov, who has adopted a bullish stance, the EUR/USD will break through the 1.3020 static resistance and head towards 1.3170. On the downside support is seen at 1.2874.
**The Yen Remains Higher Against the US Dollar**
The yen remained strong against the dollar in intraday trading and at 12.35 the USD/JPY was at 81.86/90 or -0.33 percent down. With risk aversion prevailing among traders, the pair has fallen from its session high of 82.23 and has remained in the 81.90 range after briefly touching 81.71.

“Increasingly if feels like the market wants to take some profits on short yen positions,” said Valentin Marinov, head of European G10 FX strategy at Citigroup Global Markets, as quoted by Bloomberg. “Uncertainty over the fiscal cliff is likely to remain elevated and this is likely to force more people to close shop and preserve their cash ahead of year-end.”

!m[US Treasury Said Yuan is Undervalued but Stops Short of Calling China “Currency Manipulator”](/uploads/story/917/thumbs/pic1_inline.png)The Japanese currency has fallen by 8.5 percent this year, the biggest drop among the 10 developed-nations tracked by Bloomberg. The second worst performer is the euro, having lost 2.4 percent, followed by the US dollar, which is 1.9 percent lower.
**The Yuan – Undervalued According to the US Treasury**
The US Treasury Department said yesterday the Chinese currency remains “significantly undervalued” but refrained from labelling China a currency manipulator. At a semi-annual report, the Treasury said that China does not meet the legal requirements to be deemed as a currency manipulator, despite the fact that Beijing controls the pace at which the yuan appreciates.
The renminbi has risen 12.6 percent against the greenback since June 2010 but despite those gains the US believes China should allow greater flexibility in the exchange rate. “The available evidence suggests the [yuan] remains significantly undervalued, and further appreciation of the [yuan] against the dollar and other major currencies is warranted,” the Treasury said.
According to experts, the US government could have labelled the world’s second biggest economy as a currency manipulator but chose not to in order to avoid angering Chinese leaders and starting a trade war. The last time the Treasury made the accusation of currency manipulation was 18 years ago and once again it was China that was cited.
According to Chinese policy makers, the yuan is almost at an “equilibrium”, which means it is unlikely to appreciate much more.