Forex currency trading: According to Reuters.com the euro has recovered against the dollar as investors chose to buy back the single currency.
This is after it had plummeted to a seven-week low earlier on fears of a political deadlock in Italy could cause wider problems.
Gains in the euro may, however, prove short-lived, according to some strategists, as the inconclusive election in Italy threatens to hinder economic reforms there and trigger a renewed euro zone crisis.
A fragmented parliament in Italy, the euro zone's third largest economy, could reignite fears about other heavily indebted countries, particularly Spain and raise doubts on whether the region had seen its worst.
The euro rose to as high as $1.3119, rebounding from a $1.3018 hit during early London hours which was its lowest since Jan. 7. It was last trading up 0.2 percent on the day at $1.3081. For some Forex currency trading brokers the increase of the euro price is good news.
Against the yen, the euro was up 0.4 percent at 120.39 yen, but not far from a one-month low of 118.74 yen that was struck on Monday, when it posted its single biggest percentage loss since early May 2011. That might be profitable for some Forex currency trading operations.
The euro has steadily lost ground this month, retreating from a 15-month high against the dollar and a near three-year high against the yen.
Recent data has reminded investors that the region is still grappling with a recession as southern European countries struggle to bring down high debt levels by imposing painful austerity.
Markets would be looking for hints on further policy moves after some within the Federal Reserve System – the Fed has voiced concerns about how long it should keep buying Treasury bonds to support the economy.
The Fed chief is expected to strike a dovish note, and that could see the dollar pare some of its recent gains.
While expectations of more monetary easing by the Bank of Japan could pressure the yen, the Japanese currency could remain supported at the expense of growth-linked currencies if risk appetite abates further.
For Forex currency trading brokers the fluctuation in the market could be an advantage to make some profit.