- Risk aversion the order of the day as events in Iran and North Korea send JPY and CHF crosses lower.
- Chinese President in Russia for meeting of BRIC. No new comments on reserve currency expected.
- Chinese FDI remains sluggish.
- UK CBI sees economy weak but improving.
- G8 signals end of financial crisis
- AEP- bearish articles on Latvia and the ongoing German credit crisis
- Regional stockmarkets lose between 0.25% and 3%. Oil price falls slightly on geo-political events.
EUR/USD opened at 1.4000 after closing in NY at 1.4020. The demonstrations after the Iranian election and comments from North Korea that they will further enrich uranium for use in nuclear weapons saw risk aversion return to the FX market. The USD has gained ground against the EUR, AUD and GBP but both the CHF and the JPY have also benefitted from the return of risk-aversion sentiment. EUR/USD has gradually fallen throughout the session, triggering stops below 1.3950 just after Tokyo lunch.
GBP has been the worst performing of the majors so far today despite some upbeat comments from the CBI. Bids below .8500 in EUR/GBP and profit taking in GBP/JPY have been the main drivers of sterling weakness. The AUD has been under pressure all day as commodity prices slid. It was briefly buoyed by a Chinese Finance Ministry comment that Australian/Chinese relationships won’t be harmed by the failed Rio/Chinalco deal.
USD/JPY has drifted lower as traditional JPY buying on the 15th of the month has been obvious since the open. Further heavy selling of USD/JPY is expected on the approach to 99.00 and heavy stops are expected above. EUR/JPY has fallen 100 pips to 137.00.
Ranges: EUR/USD 1.3947/1.4004; EUR/JPY 137.00/87; USD/JPY 98.11/55; Cable 1.6063/1.6142; AUD/USD .8064/.8100.
Markets: Shanghai -0.3%; HK -0.3%; Kospi -1%; Nikkei -0.5%; Taiwan -3%. Oil -$0.5 @ $71.50/bbl. Gold steady at $940/oz.
