US Dollar, Japanese Yen Soar as Asian Stocks Fall Most in 14 Months

Key Overnight Developments

• Dollar, Yen Soar as Asian Stocks Fall Most in 14 Months
• G20 Says Global Recovery Faces “Significant Challenges”

Critical Levels



The Euro and the British Pound tracked lower in overnight trade, down as much as 0.8 and 0.4 percent respectively against the US Dollar as the greenback soared on safety demand amid intense risk aversion (see below). We remain short EURUSD.

Asia Session Highlights



The US Dollar and the Japanese Yen pushed sharply higher against the spectrum of major currencies as Asian stock exchanges tumbled the most in 14 months, boosting demand for the safety-linked currencies. The MSCI Asia Pacific regional equity benchmark index slumped 3.3 percent after Friday’s disappointing US jobs report, which traders treated as a bellwether for the global economic recovery. Indeed, with the EU growth buried under a growing pile of debt and China proactively slowing its buoyant economy amid fears of asset bubbles and runaway inflation, the US was left as the last major engine of growth where some hope could be had. With those hopes clearly disappointed, the door is now open for an aggressive return to risk aversion amid fears that the rebound will lose traction, exposing the possibility of double-dip recession. The dour mood was further reinforced at a meeting of G20 finance ministers in Busan, South Korea over the weekend, where policymakers said the global rebound now faces “significant challenges” and clashed over how best to deal with the looming slowdown.

Euro Session: What to Expect



With nothing of note on the economic calendar, risk sentiment is likely to remain as the central catalyst for currency market price action in European trade. US equity index futures are trading sharply lower – down 0.7 percent in late Asian trade – hinting at continued risk version and promising further gains for the safety-linked US Dollar and Japanese Yen.

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