After a strong run yesterday, the risk trade stalled and the Yen gained ground in response to Chinese equities stumbling out of the gate and a wave of profit taking after yesterday’s moves. With the US out on holiday, traders looked to the languid Asian equity markets as a barometer of risk. Unable to sustain yesterday’s moves, the crosses came under selling pressure early, as traders cut longs on what some felt was an overbought market, and the CSI 300 opening lower by over 1.5% surely didn’t prevent the cross selling. EUR/JPY initially opened to highs near 133.45, but followed a downward path from there, hitting below 132.90 for a low late in the day. AUD/JPY shed about 50 pips, and NZD/JPY was lighter by almost 40 pips as the day wound down. GBP/JPY had the biggest move however, dropping from near 152.15 to lows of 151.40, although the GBP/USD was steady ahead of the BoE rate decision due out on the 10th. Traders are concerned that the Bank of England may continue its asset buy back stimulus program as it leaves rates unchanged at 0.50%. Finally, the Yen strengthened against the greenback as well, sinking a good 35 pips to session lows near 92.70 although the Nikkei was in the green amidst very sluggish trading. Full text »
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