Analysis prepared by:

Joaquin Monfort
Forex4you analyst

The single currency dropped to a four-month low against the dollar as investors fretted about the possibility of Greece’s exit from the euro zone and about Spain’s banking sector after Moody’s downgraded 16 Spanish banks.

Gold eased $1.45 to $1,571.80 an ounce by 0653 GMT, on course for a weekly fall of 0.6 percent – its third losing week in a row.

Gold rallied more than 2 percent on Thursday, its biggest one-day rise since January, supported by a decline in regional U.S. factory activity that fueled hope for more monetary stimulus.

U.S. gold for June delivery edged down 0.2 percent to $1,572.

“We’d like the market to hold at $1,550-$1,560. If it does that, then I think there’s a fair chance we could continue higher towards the $1,600 level, perhaps re-establishing the range there,” Nick Trevethan, senior metals strategist at ANZ in Singapore.

“But if the headlines out of Europe continue poorly, we may retest the lows,” Trevethan said.

Bullion raced to a record of about $1,920 an ounce last September on fear the euro zone crisis could spiral out of control.

But this year, the precious metal is moving in tandem with assets that are perceived to be risky while safe havens, including the dollar and U.S. Treasuries, became more appealing.

JEWELLERS SELL

In the physical market, higher bullion prices prompted selling from jewellers and speculators, but premiums for gold bars were mostly steady at $1.10 to $1.20 to London prices in Singapore. Earlier this week, dealers noted buying interest from Thailand, Indonesia and India.

“I’m so confused in this kind of market. We did buy scraps from Monday to Wednesday, but now we are selling. The market has gone up and down so much,” a dealer in Singapore said.

“Thailand is selling gold, and I am not sure what India is doing right now.”

Gold demand in top consumer India is likely to moderate in 2012 as higher inflation trims disposable income at a time prices are stubbornly high on a weak rupee, the head of the World Gold Council in the country told Reuters.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust, rose 0.17 percent on Thursday from Wednesday, while, that of the largest silver-backed ETF, New York’s iShares Silver Trust, climbed 1.08 percent during the same period.

The single currency also lost ground against the dollar, slipping to $1.2681 from $1.2693 in New York.

The dollar was changing hands at 79.41 yen, nearly flat.

The 17-nation eurozone’s common currency suffered amid a credit rating downgrade on debt-riddled Greece and 16 Spanish banks, raising fresh fears about the continent’s fiscal woes and a possible eurozone exit for Greece.

The Japanese currency was also buoyed by official data released Thursday showing Japan’s economy grew by a faster-than-expected 1.0 percent in the three months to March on the previous quarter.

“Japan’s first quarter GDP figures were strong, so the yen is the beneficiary of both Japan’s own economic fundamentals as well as flight from the dollar and the euro,” said Daisuke Uno, strategist at Sumitomo Mitsui Banking Corp.

The yen’s strength may not be a short-term phenomenon, with Japan’s embattled economy looking relatively strong compared with others, he added.

“Over the next month, a dollar fall to the 77-yen level is conceivable,” Uno said.

Japanese Finance Minister Jun Azumi reiterated his call to tame the yen, vowing on Friday to act “appropriately” if necessary, raising the possibility of another currency market intervention.

“We will watch the foreign exchange markets with a greater sense of caution and act appropriately when necessary,” he told a regular press briefing in Tokyo.

“In particular, there were volatile movements in the currency markets overnight, with the dollar falling rapidly from the low 80s to the low 79s against the yen,” he said.

Fitch Ratings downgraded Greece’s credit a notch Thursday, to CCC from B- and rival agency Moody’s cut the debt ratings of 16 Spanish banks by one to three notches.

– Dow Jones Newswires contributed to this report –

Analysis prepared by:

Joaquin Monfort
Forex4you analyst

Analysis prepared by:

Joaquin Monfort
Forex4you analyst

LONDON: Sterling hit a one-month low against the dollar on Thursday as concerns about Greece ditching the euro boosted demand for the safe-haven U.S. currency, with investors also wary of the pound after the Bank of England cut UK growth forecasts.

The pound looked likely to edge higher against the euro, however, and could test a 3-1/2 year high if the political turmoil in Greece further fuels demand for alternatives to the common currency.

Greece faces fresh elections on June 17 that could see parties opposed to austerity take power and, in a further blow to investor confidence, the European Central Bank halted liquidity operations with some Greek banks because they are severely undercapitalised.

The pound dipped around 0.1 percent against the dollar to $1.5887, its lowest level since mid-April. Support was seen around $1.5827 where sterling’s 100- and 200-day moving averages converged, while traders reported an options expiry at $1.5930.

The euro rose 0.2 percent to 80.01 pence but remained within sight of the 3-1/2 year trough of 79.50 pence hit on Wednesday.

“Sterling is going to come under pressure against the dollar, which will continue to be the ultimate safe haven in the current environment,” said Ian Stannard, European head of FX strategy at Morgan Stanley.

“Euro/sterling will see more of an edge lower than a sharp move, but overall euro weakness will remain very much intact.”

Many analysts said sterling would continue to fall versus the dollar after the BoE’s Inflation Report on Wednesday painted a gloomy outlook for the UK economy and left the door open for another round of asset buying.

Policymakers warned of risks to the UK from the euro zone crisis and downgraded medium-term inflation forecasts, which could be used to justify printing extra money to buy bonds.

“Overall the report reinforces our view that the asset programme will likely be resumed by the summer. In these circumstances, the pound should begin to trade on a softer footing,” Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi said in a note.

US dollar runs into profit-taking, having climbed to its highest since mid-January, which coupled with stronger Asian bourses and a firmer euro, helped risk sentiment.

The Aussie edges up 0.2 pct on the day to $0.9933 . It had dipped to $0.9870 overnight, its lowest since Dec 15.

The Aussie broke below parity on Monday for the first time since Dec. 20, ending the longest stretch above $1.00 in its post-float history.

Key support at the mid-December low of $0.9860 with resistance at $0.9985.

The kiwi rises 0.3 pct on the day to $0.7670 , pulling away from a five-month trough of $0.7624 overnight as the currency follows a slight recovery in the euro.

But the kiwi remains on the backfoot, with the trade weighted currency basket falling to its weakest since late December.

Once the leading performer of the commodity currency bloc, the kiwi has lost around 1.5 pct so far this year. Support at $0.7624, the low for the year and below that $0.7550, with $0.7700 likely to cap the topside.

Charts suggest the selling of the Aussie and NZ dollars is looking overdone on a technical basis and a period of choppy consolidation around current levels seen as likely.

Both Aussie and kiwi nursing heavy losses since the escalation of the euro zone debt crisis, which has sent investors to safe-havens like the yen. The kiwi has lost 5.5 pct this month while the Aussie is 4 pct lower.

Against the yen, Antipodeans regain ground, aided by Tokyo buyers. Aussie edges up to 79.80 yen off four-month lows of 79.28, while the kiwi at 61.57 yen, having hit 61.21, its lowest since Jan. 17.

Aussie near two-month highs against the New Zealand dollar at NZ$1.2955, having hit NZ$1.2998 on Wednesday, its highest since March 7.

Australian bond futures run into profit-taking following recent hefty gains, with the three-year bond futures contract 0.04 points lower at 97.400, having struck a 20-year peak of 97.470 on Tuesday. The 10-year contract off 0.035 points lower to 96.790, also not far off a record high of 96.850.

NZ government debt also struck by profit taking after recent strong gains, sending yields as much as 8.5 basis points higher.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst

Analysis prepared by:

Joaquin Monfort
Forex4you analyst

Analysis prepared by:

Joaquin Monfort
Forex4you analyst