A North Korean government spokesman says that all relations with Soth Korea have been cut, Reuters reports.

Escalating tensions on the Korean peninsula have accelerated risk aversion throughout the markets, adding to the contagion from Europe.

As part of the G20 framework, Obama says the US is willing to raise its savings rate but purely export-driven like China and Germany must improve domestic consumption. How they do that is up to them, he says.

Markets are backing and filling, with risk aversion easing a bit as stocks climb off their lows. With any luck, the worst is over for EUR/JPY, AUD/USD, etc…

Some of the oil buying at the height of the mid-morning reversal was apparently sparked by talk of a coup in Nigeria. Um, no. It was Niger. One has oil, one has uranium…the one with uranium has a coup earlier today. Never mind, as the saying goes…

The Lisbon treaty has been eight years in the making and is on the brink of coming into force, but not if Klaus gets his way

http://www.guardian.co.uk/world/2009/oct/14/vaclav-klaus-lisbon-treaty-czech?CMP=AFCYAH

Well, now we have Berlusconi batting for Blair

http://www.guardian.co.uk/world/2009/oct/14/silvio-berlusconi-backs-tony-blair

Bellezza! (As the Aussies might say.)

And they say laughter is the best medicine.

Those of you hoping for some big moves today during the Asian session are likely to be disappointed. Tokyo are having another holiday and with no major developments in the financial markets, it is probably going to stay quiet. Developments in the CIT on-off bankruptcy and various geo-political events are most likely to affect markets today.

In other words, its bullshit. Pardon my French…These summits are a complete waste of time…

The odds of robust debate on currencies diminished with the departure of China’s Hu Jintao but now a Japanese official says there was no discussion of the dollar’s reserve role at the G8 summit.

Markets have softened in the wake of the oil inventory data but we remain range-bound. GBP/USD failed to overcome 1.6140 and slumped quickly back toward 1.61.

The riots in Urumqi have led to the Chinese President, Hu Jintao, returning home and he will miss the G8 conference according to reports on the newswires. I guess that will greatly reduce the possbility of any reserve currncy mentions over the weekend.

This is probably not what the Chinese Premier likes to hear on the eve of the G8 meetings. The death toll continues to rise although some reports are saying that the streets are now calm.

• Military coup in Honduras to oust the leftist leader has Venezuelan hothead Chavez threatening military action
• Situation in Iran continues to simmer although the opposition leader has reduced some of his demands and this has eased tensions for the moment
• Pakistan continues to struggle to deal with the rise of the Taliban in certain areas- which is worrisome as it is a nuclear power. Upcoming elections in Afghanistan will show how much of a power-base the resurgent Taliban is building in the wider region.

Any major developments on these fronts will help the USD and see the JPY crosses slide.

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