Commodity-dependent currencies hold gains, eyes on Greece
Commodity price-dependent currencies such as the Australian dollar and Norwegian crown were the main movers on major foreign exchange markets on Tuesday, gaining up to a third of a percent on talk of more economic stimulus in China.
There was a broadly steady tone to the dollar, yen and euro which have traded on a more even keel for the best part of two weeks since the European Central Bank announced a quantitative easing scheme to reflate the euro zone economy.
Investors were keeping a close eye on the situation in Greece and the conflict in Ukraine, but the main event overnight was a fall in Chinese inflation to a five-year low, supporting expectations of more policy easing by Beijing to support growth.
That pulled the Shanghai stock exchange higher, generating a 0.3 percent gain for the Aussie, which is highly geared into the outlook for its main Asian trading partner. AUD=D4
Oil prices were about 1 percent lower than Monday's close but have recovered by around 25 percent from January lows. Brent oil futures LCOc1 hit a six-week high on Monday.
"There is the feeling that oil has bottomed out and that is helping some of the commodity pairs," said one spot currency dealer at a London bank.
"All of these currencies had taken a battering so I would say some recovery is no surprise."
The Norwegian crown EURNOK= also edged up around 0.2 percent to 8.6119 crowns per euro while another oil-related play, the Canadian dollar, was steady at C$1.2468 per U.S. dollar. The New Zealand dollar gained 0.3 percent to $0.7430.
Concerns over a standoff between Greece and its euro zone partners are keeping investors on edge, weighing on the euro while supporting the yen, which tends to gain at times of international financial stress.
The euro was roughly steady on the day after dipping close to $1.1300 in early trade in Europe.
Greek Deputy Prime Minister Yannis Dragasakis said on Monday negotiations were ongoing with the European Union over the country's debt and bailout problems, but that no agreement had been reached.
"At some point this week, we're going to see the single currency break from the relative resilience we've seen so far in relation to events in Greece," London retail broker FxPro's chief economist, Simon Smith, said.
"The fact is that between the two pivotal players, Greece and Germany, there has been absolutely no sign of compromise."
Against the yen, the euro fell as far as 133.67 EURJPY=R before recovering to 134.55.
Investors are also focused on the Eurogroup meeting, where Greece's finance minister has said he will present a comprehensive proposal to a meeting of euro zone finance ministers on Wednesday.