Market Review – 16/03/2011 20:40 GMT
The Japanese yen reaches record high on worsening Japan nuclear crisis
The Japanese yen surged across the broad on Wednesday as the deepening Japan’s nuclear crises triggered heavy risk aversion. Usd/jpy pair tanked below 79.75 (the same as April 1995 low) to 79.56 ahead of NY closing.
The EU energy Commissioner Guenther Oettinger said on Wednesday that the situation at Japanese reactor is ‘effectively out of control’ and there could be catastrophic events in a short period. U.S. Nuclear Regulatory Commission Chairman Gregory Jaczko also recommended an evacuation area must larger than has taken place around Japan’s reactors.
Earlier, the dollar continued to ratchet lower against the Japanese yen from Asian high of 81.81 on Wednesday n intra-day decline accelerated in NY morning after triggering stops below 80.60 on the remarks from EU energy chief Guenther Oettinger. The pair eventually tumbled below 79.75 (the same as April 1995 low) to 79.56 before NY closing. Eur/jpy, aud/jpy, gbp/jpy also tanked from 113.48 to 110.59, 80.74 to 77.98 and 130.53 to 127.12 respectively before rebounding.
The euro fell on Wednesday on aggressive cross-selling versus the Japanese yen and the Swiss franc. The euro dropped briefly to an Asian low of 1.3961 as traders sold the single currency as a late reaction to news of Portugal’s downgrade by Moody’s during the Australian session. Although price staged a brief recovery, the single currency then fell sharply from 1.4001 to as low as 1.3867 in late NY as the fear escalated over a nuclear crisis in Japan, dampening risk appetite. Cross-selling in euro versus the yen and Swiss franc put heavy pressure on the single currency as eur/chf also tumbled from 1.2853 to 1.2588.
In other news, Governing Council member Erkki Likkanen was quoted as saying that it is still early to determine how the Japanese earthquake will affect the European Central Bank’s decisions in coming months.
The British pound also fell against the dollar on Wednesday. Despite a brief rise from Asian low of 1.6048 to 1.6132 in European morning, cable then pared early gains after the release of mixed U.K. jobs report and intra-day weakness in the euro dragged price to as low as 1.5985 in late NY trading.
The Swiss franc rose to a fresh lifetime high of 0.9072 against the dollar on Wednesday as investors flock into to franc as a safe-haven asset.
On the data-front, The January Australia Westpac leading economic index came in as -0.1% versus previous reading of 0.8%. U.K. Feb. Claimant count fell by 10,200, biggest monthly drop since June 2010, versus economists forecast of an increase of 1,000. U.K. ILO unemployment rate in 3-months to Jan was 8.0%, the highest rate since Jan-Mar 2010. EU HICP final value came in as 0.4% m/m and 2.4% y/y which meeting economists’ forecasts. And U.S. PPI rose by 1.6% m/m and 5.6% y/y versus the economists’ forecast of 0.7% m/m and 4.8% y/y respectively. U.S. housing start and building permits dropped by 22.5% and 8.2% to 479,000 and 517,000.
Data will be released on Thursday include:
Japan Tertiary industry index, Swiss SNB rate decision and industrial production, U.S. CPI, real earnings, jobless claims, midwest manufacturing index, capacity utilisation,industrial productions, leading indicators and Philadelphia fed survey and Canada wholesale sales.