The Euro retraced in Asia to consolidate after a big drop against the dollar on Thursday when it lost as much as 260 pips. Investors are beginning to lose confidence in the European Central Bank in controlling the debt crisis in the euro zone and also fear a U.S. downfall due to the underlying weakness of its economy. Markets will remain cautious until the release of the U.S. non-farm payroll data later today, which is anticipated to be disappointing. EURUSD fell to 1.4054 from the Asian open of 1.4089.
Sterling imitated euro’s movements and rebounded slightly against the dollar in Asia after its huge 116 pip drop yesterday. Heightened risk aversion pushed investors away from the Pound to safer havens. The outlook for recovery in the U.K. economy is very dim at the moment, and this view was cemented yesterday after the Bank of England’s monetary policy statement and unwillingness to raise interest rates. GBPUSD opened Asia at 1.6258 and closed the session at 1.6256.
Yen strengthened against all of its major counterparts on investor concerns of a global recession, and consequently increasing demand for safer assets. The Japanese currency tends to perform well during times of financial turmoil, perceived as a safe haven. A Bank of Japan report this morning mentioned the Japanese economy is picking up, helping boost the yen further. The yen gained against the dollar, paring its biggest weekly loss in four months, ahead of the much anticipated U.S. report on non-farm payrolls, which will indicate if more jobs were added or if the world’s largest economy is stagnating. Investors are bracing for a negative result, and began selling off the dollar. USDJPY fell to 78.41 from the session open of 78.85.
The Australian dollar initially dropped against the dollar after the release of the Reserve Bank of Australia’s statement on monetary policy before retracing again. AUDUSD touched as low as 1.0422 after opening Asia at 1.0461, as investors sold off the aussie in reaction to the RBA’s pessimistic statement in euro zone debt as well as U.S. fiscal problems and economic growth. A slowing global economy usually negatively affects commodity-linked currencies like the AUD.
Gold rebounded in Asia after a big drop from its record high in the previous session. Spot gold opened Asia at $1,646.57 and closed up at $1,655.47. The precious metal will remain supported as investors protect themselves from the consequences of the deteriorating growth outlook for the global economy and Europe’s worsening debt crisis. U.S. non-farm payroll data out on Friday could affect gold prices depending on the results.