Forex Flash: Policy Action supports EUR/USD stability – BTMU (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts believe that looking forward into 2013, EUR/USD´s stability looks set to remain intact.

They note that the euro has continued to remain relatively stable against the US dollar in early 2013 with the pair consolidating above the 1.30-level. Policymakers both in Europe and the US have indirectly been proved successful in helping to stabilize the pair which they feel is clearly evident by the quarterly closing prices for EUR/USD which have remained in a tight range between 1.267 and 1.339 over the last six quarters.

They write, “The ECB’s commitment to purchase unlimited euro-zone government bonds combined with the Fed’s decision to implement open-ended quantitative easing during the recent peak of the euro-zone debt crisis helped to prevent EUR/USD breaking lower. It appears likely that EUR/USD stability will continue in Q1 2013 with upside and downside risks broadly balanced. Our one and three-month forecasts are 1.32 and 1.30 respectively.”