The euro fell 185 pips today as investors realized that the euro zone debt crisis will take longer than expected to be resolved, after German finance minister Wolfgang Schaeuble commented that a definitive solution will not be possible before the EU Brussels Summit this weekend. This dampened risk appetite, which had been high in early morning trading following some optimistic comments after the conclusion of the G20 Summit. EURUSD extended its decline into the US session, falling to a low of 1.3729. After euro made its best weekly gains in over two years last week, investors took the opportunity to unwind long euro/dollar positions and take profit.
GBPUSD took direction from EURUSD movements and fell to a low of 1.5730 before steadying off for the rest of the US trading session. With a risk aversion returning, investors turned away from risk like the pound after comments by German government spokesman Steffen Seibert said European leaders won’t fulfill any “dreams” of a quick end to the euro- area’s debt crisis at their October 23 summit.
The Australian dollar weakened as usually higher-yielding currencies tend to be vulnerable in times of risk-off environment. Also speculators are selling the aussie before the Reserve Bank of Australia releases minutes of its October 4 meeting tomorrow. RBA Governor Glenn Stevens signaled there is room for interest rate cuts if necessary. Lower interest rates weaken the currency. AUDUSD fell to as low as 1.0175 from a one month high of 1.0370 hit in the European session.
The Canadian dollar weakened against its US counterpart in a risk-off market and an equity market selloff in reaction to concerns on the euro zone debt crisis not being resolved soon. Futures on crude oil, Canada’s biggest export, lost over $1 a barrel in New York trading, weighing down on the commodity price-sensitive loonie and pushed up the greenback. USDCAD rose to 1.0209 from the New York price of 1.0100.
USDJPY fell to a US session low of 76.59 from 77.24 and EURJPY fell to 105.35 from 106.56 as the yen benefitted from risk aversion today.