Euro was hurt after news of Spain’s downgrade by S&P by two notches to BBB-plus from A and gave it a negative outlook. The ratings agency warned that it expects the Spanish government’s budget deficit to deteriorate even more than previously thought due to economic contraction. Spanish bond yields could rise as a result, once European markets open and bring down the euro. Also focus is on an Italian debt auction later. EURUSD opened in Asia at 1.3217 and fell to 1.3175.
Sterling held onto gains after rising to a seven-month high yesterday. GBPUSD was little changed in the Asian session, trading between 1.6189 and 1.6464.
The yen fell after the Bank of Japan eased monetary policy. Even though it was expected that the BOJ would ease policy, the measures taken slightly surprised and were beyond market expectations. The dollar jumped to as high as 81.43 yen from 80.47 after the BOJ policy announcement before giving up some of gains to trade around 80.90 yen. EURJPY also see-sawed, jumping to 107.46 from 106.25 and easing back down to 106.38.
The Australian dollars proved resilient to the news flow regarding a surprise ratings downgrade for Spain as well as the Bank of Japan new policy measures. Aussie briefly dipped 20 pips after S&P cut Spain’s rating but soon recovered, then fell slightly again after the BOJ announcements. AUDUSD swung from a high of 1.0396 to a low of 1.0358.