• All the action happened pre-Tokyo open with AUD/JPY falling by 3% in an hour
  • Cable fell heavily after the UK Treasury downgraded the GDP forecast for 2009
  • Japanese finance minister Fujii raises the prospect of joint intervention
  • Japan’s unemployment rate falls to 5.1%
  • Dubai default story continues to rattle credit and equity markets
  • Regional stockmarkets lose around 2.5% on average
  • AUD undermined by renewed prospect of ETS failure and early general election
  • Oil fell 2.7% but Gold only fell by 0.1%.

USD/JPY started to fall about 1 hour before the Tokyo open as risk aversion brought on by the Dubai world credit issue gained momentum. Firstly the market broke through the previous 86.30 low and then proceeded to fall another 140 pips to a low of 84.85 in a period of 30 minutes. Verbal intervention managed to steady the ship and when the Nikkei opened ‘only’ 1.5% lower, some short covering occured. Liqudity was at times atrocious and spreads were much wider than normal. Range 84.85/86.60.

AUD/USD fell through the overnight low of 90.90 at around the same time as USD/JPY started to fall. This also signalled a break of a long term trend line and this ushered in heavy stop loss selling. At one stage AUD/USD fell from .9070 to .9000 in about 2 minutes before recovering. Range: .9000/.9145

EUR/USD took somewhat of a back seat whilst most of these moves were taking place, hanging around 1.5000 until a nasty spike lower took out stops below 1.4950. The market jumped straight back to 1.5000 but has gradually slipped lower along with the AUD and the GBP. Range: 1.4916/1.5022.

Sterling fell early from 1.6535 to 1.6490 after the announcement regarding the 2009 UK GDP forecast downgrade. A period of consolidation was then broken when heavy GBP/JPY selling saw that pair crash 300 pips from 142.50 in less than an hour. Further cable stops were triggered on the break below 1.6410. Range: 1.6378/1.6535.

Markets: Nikkei -2%, Kospi -2.5%, Sydney -2.5%, HK -3%.

Thank you all for your kind comments and input through the week and for sparing me when I get it wrong. Have a great weekend.