- UN security council ends special 8 1/2 hour session with no agreement on Korea
- South Korea plans live-fire drill, North threatens retaliation
- Safe-haven USD and CHF buying emerges
- Latest CBI forecasts see slow growth for UK in 2011
- ECB says Irish bank-rescue plan must be adjusted
- BOJ starts two-day meeting today, no change in policy expected
- Japan: Political in-fighting threatens stability
- Shanghai stock exchange falls almost 3%
It has been a session dominated by fears of an escalation on the Korean peninsula. South Korea announced a live-fire drill and then told some residents to head into air-raid bunkers. The UN security council meeting ended without any agreement and this added to the uncertainty.
The USD and the CHF benefitted from safe-haven plays but some of this is now being unwound as the session comes to a close. The JPY actually strengthened a little which is unusual in the face of regional geo-political tension.
EUR/USD opened around 1.3185 but has traded lower for most of the day, first affected by the ECB announcement re the Irish bank bailout and then by cross selling primarily in EUR/CHF and in EUR/AUD, which reached a new record low. Ranges: EUR/USD 1.3125/87, EUR/CHF 1.2725/85
AUD/USD fell early in line with the other majors but rebounded strongly back above .9900 on EUR/AUD selling. The regional tensions and the fall on the Shanghai bourse encouraged some profit taking and drove the AUD lower late on in the session. Ranges: .9860/.9904
USD/JPY had opposing factors at work; the risk aversion encouraged selling in the JPY crosses whereas the Korean situation encouraged USD/JPY and CHF/JPY buying. All up this resulted in little or no net movement. Ranges: USD/JPY 83.83/84.11, EUR/JPY 110.19/73
Cable followed the EUR in the main but was briefly affected by the CBI forecasts which sent EUR/GBP to session highs. Ranges: Cable 1.5478/1.5528, EUR/GBP .8470/.8502
Markets: Shanghai -2.9%, HK -1.2%, Kospi -1.5%, Nikkei -0.4%. Gold +$5 to $1385/oz.
