- Trichet: Still believes in strong USD, avoids commenting on Greek restructure
- China reportedly lifting capital adequacy ratios for big banks
- Silver continues rollercoaster ride, down nearly 4% on session
- Regional stocks fall by around 1%
The USD has regained some ground in Asia as profit taking ahead of the Fed meeting as well as massive volatility in the Silver market particularly determined the FX market directions.
The first move in EUR/JPY and USD/JPY was down with the latter testing reportedly strong bids near 81.50. The first test failed but another attempt is evolving as the session nears a close. EUR/JPY fell heavily, down 100 pips quite quickly, as the market over-reacted somewhat to Mr Trichet’s comments on inflation. There has been no sign of any Kampo bids thus far today but the rumours are very strong that the BOJ will not countenance USD/JPY back on the 80 handle. Ranges: USD/JPY 81.55/98, EUR/JPY 118.48/119.43
EUR/USD fell sharply along with EUR/JPY after the Trichet comments were taken to mean that inflation may not be the threat that the market thinks it is. I don’t think that is what he was really saying but in thin markets, stops were triggered below 1.4515 before a bounce ensued. Dealers also noted profit taking by USD shorts ahead of the Fed. Ranges: EUR/USD 1.4492/1.4587, EUR/CHF 1.2812/51
AUD/USD has also been heavy with general risk aversion caused by falling PMs and stocks and general USD short covering. Bounces have been lacklustre. Ranges: 1.0673/1.0730
Cable’s fall was stalled by some decent-sized buy orders at 1.6460/70 with more reported at 1.6435/45. Ranges: 1.6450/1.6510, EUR/GBP .8805/40