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Friday, December 08, 2006

EUR/USD: Reserve Diversification Still the Key

Dealers report a variety of central banks came in to buy EUR/USD as prices bounced back after the decent US employment report. Two high profile bouts of intervention have been seen in the market in the last two days with Russia buying chunks of USD Ruble and converting part of the proceeds to EUR and the same being said for South Korea, which was a cable buyer as well earlier today.

As long as central bankers look to spread their reserve risks, the EUR will be the prime beneficiary. Offers are seen layered up from 1.3350 to 1.3400 but expect black-box types to rush in on the buy side if recent 1.3367 highs are overcome. 1.3290 is support on pullbacks.

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