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Dollar, Yen Aim to Extend Gains on Asia Slowdown and Euro Crisis Fears

Dollar, Yen Aim to Extend Gains on Asia Slowdown and Euro Crisis Fears

Ilya Spivak, Head Strategist, APAC

Talking Points

  • BOJ, PBoC Officials’ Comments Stoke Asia Growth Slowdown Fears
  • Germany’s Roesler Hints Policymakers Mulling Greek Eurozone Exit
  • S&P 500 Futures Point to Further Risk Aversion in the Hours Ahead

The US Dollar and Japanese Yen soared as Asian stock markets slumped to start the trading week, boosting demand for the go-to haven currencies. The sentiment-linked Australian and New Zealand Dollars bore the brunt of the selloff in the FX space. The MSCI Asia Pacific regional equity benchmark index fell 1.6 percent. The surge of negativity was chalked up worries about slowing Asian economic growth and rebuilding Eurozone debt crisis fears.

BOJ Governor Maasaki Shirakawa said monetary expansion alone will not boost economic growth while PBOC adviser Song Guoqing predicted Chinese economic growth would slow to 7.4 percent in the third quarter, the weakest in nearly four years. On the European front, German Vice Chancellor Philipp Roesler said he was “very skeptical” about Greece’s rescue and warned the country would not get further aid if it fails to meet its obligations. He also noted that the Greece may accept the “wisdom” of exiting the Eurozone if aid terms fail, adding that such a possibility has “lost its terror”.

S&P 500 stock index futures are pointing sharply lower, warning of continued risk aversion ahead. The economic calendar is relatively quiet in European hours, with a pair of bond auctions from France and Germany amounting to the only bit of noteworthy event risk. As usual, traders will be watching average yield and bid-to-cover levels to gauge the degree of sovereign stress in the region. The Chicago Fed National Activity Index enters in the spotlight later in the day. Traders are likely to interpret the outcome through the prism of QE3 probability, with a softer outcome offering a possible counter-balance to anti-risk momentum by stoking stimulus hopes.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

1:30

AUD

Producer Price Index (QoQ) (2Q)

0.5%

0.3%

-0.3%

1:30

AUD

Producer Price Index (YoY) (2Q)

1.1%

1.0%

1.4%

5:00

JPY

Supermarket Sales (YoY) (JUN)

-3.9%

-

-1.7%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

CHF

Money Supply M3 (YoY) (JUN)

-

6.2%

Low

7:00

CHF

Real Estate Index Family Homes (2Q)

-

410.4

Low

9:30

EUR

Germany to Sell 3B in 12-mo Bills

-

-

Low

12:30

USD

Chicago Fed Nat Activity Index (JUN)

-

-0.45

Medium

13:00

EUR

France to Sell 7.5B in 3-, 6- and 12-mo Bills

-

-

Low

14:00

EUR

Euro-Zone Consumer Confidence (JUL A)

-20.0

-19.8

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2056

1.2245

GBPUSD

1.5426

1.5695

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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