The USD surged across the board in Asia, even losing its usual nexus with the JPY that typically benefitted from USD strength. The catalyst for the USD rise was the linger fears over European bank exposures to Eastern Europe, particularly in the wake of the sharp fall in the zloty on Monday. Just after the Tokyo open, Moody's issued a report warning on bank exposures to Eastern European debt which sent the EUR sharply lower from opening levels of 1.2800 to lows of 1.2632 with stops at 1.2750 and 1.2700 triggered in the move down. The EUR move weighed on GBP, CAD, NZD, CHF, AUD and JPY as well. USD-JPY, which opened around 91.70, rallied sharply to highs of 92.76, though the lingering impact of the sharply weaker GDP report from Monday also served to undermine the JPY. Broad jitters over financials emerged as concerns over the Lloyds exposure to HBOS lingered and this weighed on financial and banking stocks in the region sending all the stock markets lower. The Korean stock market came under particularly pressure, dropping 4% as banking stocks fell and with the KRW traded to the lowest levels since December 5th. S. Korean officials attempted to dispel talk of a March foreign currency crisis that undermined the currency and stocks. Oil dropped under $37 on global demand fears, ignoring supply threats from Russia who warned it could build up inventory to support prices. U.S. Treasury yields fell on safe haven flows to the USD but also in reaction to the stock slump with DJIA futures posting triple digit losses, down 102 pts.
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