FX Market Wrap - 27th November 2009European markets got the ball rolling overnight on a bearish note as economic recovery fears resurfaced. News that a Government owned company in Dubai have proposed to delay debt payments until May 2010 sent UK and European equity markets into a tail spin, with both the FTSE and DAX losing over 3 percent. With no direction from the states due to the Thanksgiving holiday, the currency markets saw investors return to the perceived ‘safety’ of the greenback which surged against major counterparts. Given the lull of confidence in Europe the higher yielding Aussie dollar followed suit, continuing on from the business investment figures yesterday which saw the Aussie retreat from 93 US Cents. The Australian Bureau of Statistics (ABS) released Private Capital Expenditure figures for the third quarter which showed an unexpected drop of 3.9 percent, against the expectation of a 1 percent rise. At the time of writing the Aussie Dollar is buying 91.2 US Cents. Meanwhile, as the world’s other 'safe haven' currency – the Japanese Yen - continues to strengthen against the greenback despite Japanese officials warned of excessive movements in the currency markets may hamper Japans export fuelled recovery. As the Yen makes ground against major counterparts, japans exports become less price-competitive against competing economies fuelling speculation the central bank may need to intervene for the first time since 2004. Despite the threat of government intervention, the Yen not only continued to strengthen against major counterparts but reached the milestone of a 14 year high against the greenback overnight. The deflationary economic environment in Japan has fuelled speculation another round of stimulus may be called for, in the form of government bond purchases by the Bank of Japan. Last week saw Deputy Prime Minister Naoto Kan direct additional pressure to the Bank of Japan in relation to the central banks role in combating deflation. This morning will see a host of economic data from Japan namely Consumer Price Index which is due to be release at 10:30 AEDT and Retail Trade figures to be released at 10:50 AEDT. FX Market Wrap - 27th November 2009Following on from a horror night in European markets, local confidence has taken a hit today on the back of a potential default of Government owned company in Dubai. The very premise of a potential Dubai default has left local investors hitting the sell trigger, with the local equity market losing over 2.5 percent. Volatility has ruled the currency markets today as traders take a defensive stance against the latest news at the expense of higher yielding currencies. The decline in market participants due to the US public holiday also has been a contributing factor to the increased volatility. True to form, the latest adversity has seen trader’s worldwide flock to the perceived safety of the low yielding US Dollar and Yen which saw the Aussie dollar take a massive hit, trading to lows of 89.8 US Cents. At the time of writing the Aussie has regained some composure buying 90.4 US Cents, but remains on eggshells as appetite for risk takes a back seat to preservation. The other hot topic of the day continues to be the strength of the Japanese Yen, which has surged to 14 months highs against the greenback despite the threat of intervention from Japanese officials. As the Yen makes ground against major counterparts, japans exports become less price-competitive against competing economies fuelling speculation the central bank may need to intervene for the first time since 2004. In a highly volatile session, the Dollar has traded to lows of 84 Yen – at the time of writing dollar is buying 86.3 Yen representing a 14 month low. |