Asian Forex Review – Euro falls after S&P downgrades Italy

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The euro fell sharply in the Asian open after having been lifted previously in New York. Markets were rattled when Standard and Poors downgraded Italy’s long- and short-term Sovereign credit ratings to A/A-1 from A+/A-1+ and gave a negative outlook. Adding to gloom was an article in a Greek paper saying the Greek Prime Minister was considering holding a public referendum on whether to exit the euro. EURUSD tumbled from the open of 1.3687 to 1.3600.

 
GBPUSD opened Asia at 1.5702 and immediately dropped down to 1.5651 as risk aversion came back after news of S&P’s downgrade of Italy. EURGBP opened at 0.8717 and plunged to 0.8683 as all euro crosses fell across the board.

 

AUDUSD to a fresh one-month low of 1.0147 on news of Italy’s downgrade by S&P but managed to rebound to 1.0241 Monetary Policy meeting minutes from the Reserve Bank of Australia September policy meeting indicated the bank is still concerned over the medium-term inflation outlook, which trimmed chances of a rate cut in the near future.

 

USDJPY opened Asia at 76.56 and first rallied up to 76.75 on broad US Dollar strength in the wake of the Italian ratings downgrade by S&P and falling Asian equity markets that weakened Asian currencies across the board. The move to the topside however ran out of steam as the session got underway it was basically a return to full blown risk aversion which gave the safe haven yen a boost and led the USDJPY pair to change direction and fell down to 76.44.

 

Gold opened Asia at $1,778.65 and held steady after the S&P downgrade of Italy’s credit rating which halted the decline of the metal (which had plunged sharply in the previous session). Safe haven demand kept gold buoyed above $1,774.85 as investors fretted about the euro zone debt crisis but remained range bound ahead of a key U.S. Federal Reserve policy meeting, so most investors prefer to wait on the sidelines now until the Fed meeting shows a clearer direction of where markets are going.