Central banks reduced their buying of US Dollars in Q3, to less than 30% of new FX reserves says Barclays Capital.

The Shanghai composite is down for the fifth day. Even though the trading day is not over, it is the longest losing streak this year. It is currently down 0.6% and a close beneath 3113 will confirm the 5th day of loses. The sell off comes on the back of government measures to curb property prices and concerns that companies will boost share sales. Support is seen at 3080, under that and we target levels back below 3000.

May have an effect on FX markets, especially if we break lower towards year end.

Chinese state researchers have rejected calls from Europe and Japan to let the Chinese currency appreciate. Chief economist at the State Information Centre in China, Mr Zhu Baoliang, said policy makers are unlikely to allow its currency to appreciate this year and that foreign pressures won’t push the Chinese government to resume appreciation.

This story plus the fact that the “Chinaman” has been seen selling AUD and NZD aggressively has weighed on the majors. There has been some risk taken off the table over the last hour or so.

Fujii taking again, saying that he prefers a stable forex market and that he will not be bringing up the issue of a stronger Yen at the G7 meeting this weekend.

USDJPY comes off down to 88.20. A mixture of stops and bids have been filled below 89.35. There is more bidding interest ahead of 89.00 with more stops below. Technically, USDJPY is trading below its Ichimoku tenkan line, today at 90.14. This descending tenkan line has been providing resistance on rallies above 90.00 over the past week.

Hirohisa Fujii, has said that he would not rule out taking action in the FX market if currency moves are abnormal. Fujii also re-iterated his view that global competition to devalue each country’s currency would be wrong but that he never said he would leave a strong Yen as it is. It suggests that the DPJ’s policy towards the Yen is closer to the LDP’s than the market thought.

It has led to a bid tone in USDJPY this afternoon and in turn has seen EURJPY demand out of Tokyo provide a base for EURUSD.

Hirohisa Fujii is at it again, saying that it is important not to over react to current FX moves, which are within a natural “margin of error”.

USDJPY unmoved.

In his latest comments, Hirohisa Fujii said that currency moves were becoming one-sided in favour of a rising Yen, and that he was watching the Yen’s rise carefully. He said he favours stable currency moves.

Seems he has changed his tone a bit after such a big move. USDJPY has moved up thru 89.30.

Mr Fujii has said that the recent USDJPY moves are normal and reiterates  that it would be a mistake to artificially influence FX levels.

USDJPY falls to 88.70, EURJPY back towards 130.00

I would say extremely prudent reading the banks half year reports. Using the fair value may hurt more than it helps showing “better” figures. The near future Oct-Nov 2009 will tell ….

It seem some of the world’s biggest currency funds cant get direction right. FX Concepts Inc have reported a loss of 5.4% in this year’s first 5 months and John W.Henry & Co. has lost 2%. A lack of clear direction and markets being pulled in opposing directions the contributing factors.

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