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Asia Recap: Euro firmer after EU bank stress tests

FXStreet (Bali) - A subdued Asian session to start the week, with the Euro having a solid performance after the EU bank stress tests results were not as bad as feared, with the USD a tad softer ahead of Wed's FOMC.

Out of the 130 largest European banks scrutinized, 25 failed on the test. However, as ANZ explains, "only 13 banks need to raise a cumulative capital shortfall of EUR9.47bn – an amount equivalent to less than 0.1% of nominal annual GDP. The results of the assessment of the euro area’s 130 largest banks, covering 82% of credit provision and EUR22trn worth of assets, should allay concerns about the health of the region’s banking system."

With monetary policy meetings coming up later on the week, including the Fed, BoJ and RBNZ, Asian traders took no chances. The Euro saw its recent downward pressures being alleviated, if only marginally, to re-visit the $1.27 handle. Meanwhile, AUD was paid some 10/15 odd pips above 88 cents mainly on a broadly weaker USD. The Yen, which opened cheaper at 108.32 in early Asia, managed to recover ground, stabilizing circa 108.00.

In other weekend news, Bank of England’s McCafferty crossed the wires, noting that - via Sunday Times - "persistent low interest rates can increase the risks of financial instability, as well as allowing underlying inflation pressures to build, requiring more dramatic action later on", also adding that "starting to raise bank rate now makes it more likely that the increase required over coming years to deliver our inflation target can be kept gradual and limited."

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