Canadian Dollar Gains with Crude Oil Prices, Japanese Yen May Rise
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Asia Pacific Market Open – FX Flash Crash, Apple, Crude Oil, Canadian Dollar, Japanese Yen
- Anti-risk Japanese Yen trims gains after FX flash crash on Apple revenue estimates downgrade
- Canadian Dollar gains with crude oil prices as Saudi Arabia plans US price hikes in February
- Chinese Caixin PMIs may trigger risk aversion after Nikkei 225 falls, Japanese Yen may rise
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The anti-risk Japanese Yen, while still having largely outperformed against its major counterparts, trimmed its gains following the FX flash crash after Apple cut revenue projections. This development crossed the wires during arguably the most illiquid part of the trading day, the transition from US market close to Asia open. Some markets were still off for the holidays. This created the perfect equation for knee-jerk volatility
Unsurprisingly, European and US equities traded lower in the aftermath as anticipated. Despite a temporary rebound in the S&P 500, it ended the day about 2.48% lower which was its worst performance since Christmas Eve. This may have been because of dismal US ISM Manufacturing data which unexpectedly weakened to its lowest in over two years.
Local government bond prices accelerated as stocks resumed their declines, reflecting a flight to safety. The US Dollar saw mixed performance as a result, pressured by fading hawkish Fed monetary policy expectations and supported by haven demand. Ultimately it ended the day cautiously lower thanks to declines earlier in the session.
The Canadian Dollar outperformed, rising with gains in crude oil prices. The latter was bolstered by reports from Aramco, the Saudi Arabian Oil Company, that it is planning on increasing the cost of US crude oil pricing in February. But, the sentiment-linked commodity then peaked amidst the resumption in losses in the S&P 500. Gold, the anti-fiat precious metal, gained with weakness in the greenback and lower yields.
Aside from risk trends, more dismal economic data out of China risks adding fuel to the nervous mood in stock markets. This was the case with disappointing PMI data earlier this week. As such, more of the same in the private sector Caixin readings may fuel risk aversion. With Japanese equities coming back online after an extended holiday, JPY may appreciate further given broad weaknesses in domestic equities.
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--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.