EURUSD opened in Asia at 1.4332 extending losses from the prior session, falling to 1.4293 with a slight rebound before closing at 1.4309. Speculation European banks lack sufficient capital. Renewed fears that the euro-zone debt crisis could infect the financial system put pressure on the euro. Meanwhile, a series of weak U.S. economic data and plummeting stock markets heightened risk aversion, pushing investors to dump risk and turn to the relatively safe haven dollar.
GBPUSD opened in Asia at 1.6515 then continued its downtrend from yesterday when it was weighed down by weak U.K. data on retail sales and mostly took direction from the euro, which took a beating as euro zone debt fears grow. EURGBP opened the session at 0.8676 and extended losses from the prior session to bring the pair to a two week low of 0.8662 as Asian players dumped euro on EZ debt concerns but then bought it back while it was low, bringing the pair up to 0.8890.
USDJPY opened Asia at 76.56 continuing consolidation before a big jump to 76.94 due to a large institutional buy order. The pair very quickly fell back down to prior levels to 76.94 and closed at 76.48. Japan’s Finance Minister Yoshihiko Noda announced again today that he is closely watching the markets. The BOJ intervened in the FX markets two weeks ago to curb yen strength and have warned they would do it again as yen remains close to record highs and yesterday Japan exports data showed exports fell 3.3% from a year earlier due to the strong currency.
The Australian dollar continued its downtrend which began on Tuesday, falling to a two week low of 1.0315 from the open of 1.0387 against the U.S. dollar. Meanwhile, commodities were lower, sapping risk demand, especially oil and copper prices dropped, hurting the outlook for Australia’s commodity exports. The aussie is a commodity-linked currency and usually takes direction from commodity prices.
Gold continued to climb to hit another record high hitting $1,844.62. Risk aversion ruled in all markets as European equities suffered their biggest daily fall in two and a half years. On Wall Street, the three major indexes were all down more than 3 percent . Investors realize that we are entering a period of persistent inflation combined with stagnant growth and high unemployment. So gold is the perfect hedge against inflation.