What's happening on the Asian front?

After the record lows of the euro and pound sterling against the US dollar last week, a correction consolidation is under way. These two currencies were at their lowest level against the US dollar since May 2009.

The verbal support given to Greece by the European Central Bank as well as by various member countries of the eurozone, combined with additional emergency measures taken by the Greek government to reduce the budget deficit, seem to have borne the fruit desired, providing respite for the euro. From their side, the Greek central bank governor George Provopoulos said in an interview published on Monday that "a scenario in which help is necessary will not become a reality". Nevertheless, the trend for the euro remains bearish; only a correction to above 1.4100 would change our perspective, paving the way for further gains on the upside.

Meanwhile, Portugal announced plans to cut its high deficit and debt as it seeks to calm investors' fears that Portugal is next in line to face fiscal problems. The plan is for Portugal to cut its deficit to 2.8 per cent of GDP in 2013 from 8.3 per cent this year by reducing spending on civil service and public investment, while raising taxes on high incomes and stock market gains.

The pound sterling has mainly benefited from the return of investors' risk appetite with robust demand for higher-yielding currencies, following the release last Friday of the employment figures in the United States. Despite the Bank of England's efforts to convince financial markets that the current bout of inflation is mainly due to the January VAT increase, the perspective that the surge in price pressure could lead to a rate hike certainly supports the pound sterling as well. But this correction should be counteracted by the political fears, maintaining our bearish views for GPB/USD.

The Japanese yen also suffered from the renewed rise of risk appetite. Talks of the Bank of Japan continuing further its lax monetary policy, with a rate ease taking place as soon as their next meeting on March 16-17, also contributed to weigh on the Japanese currency.

The annual session of China's Parliament is always a good occasion to hear what is in the mind of Chinese leaders. Prime Minister Wen Jiabao wants to keep the yuan stable during 2010, when Central Bank governor Zhou Xiaochuan said Beijing would eventually have to drop this "special" Yuan policy.

Pressures from both the United States and Europe on China to abandon their current linked exchange rate of around 6.83 yuan per USD might prove to be successful. Earlier this week, China's chief currency regulator, head of the State Administration of Foreign Exchange, said that China would attract more capital inflows this year, partly reflecting expectations of a stronger Yuan, but he gave no hints as to when Beijing will let the currency resume its rise.

He also added that the $2.4 trillion stockpile of foreign exchange reserves is appropriately diversified in US dollars, euros and yen, while renewing China's commitment to the US Treasury market saying it is an "important" one to them.

Upcoming FX key events

Today: Swiss National Bank interest rate decision and US trade balance. Tomorrow: US retail sales (Feb) and Canadian unemployment figures.

FX Technical Key points:

EUR/USD is bearish, target 1.3000, key reversal point 1.4100. USD/JPY is bullish, target 98, key reversal point 85. GBP/USD is bearish, target 1.4700, key reversal point 1.7000. USD/CHF is bullish, target 1.1000, key reversal point 0.9950. AUD/USD is bearish, target 0.7800, key reversal point 0.9400. NZD/USD is bearish, target 0.6200, key reversal point 0.7650.

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Mr Bovay is senior trader at RTFX Ltd.