Today’s action in the session saw the early calm broken by a sharp turn towards caution, as a combination of profit taking, continued discontent over Greece, and news from China put a spark to the risk adverse fuse. After yesterdays momentous moves higher in risk due to the proposed Greek aid package, traders looked to take profits on those gains, fueling strong moves higher in the Japanese yen. Pimco’s comments that it will not partake in the Greek bond auction due later in the day caused concern that demand for the battered nation’s debt may be weak, helped to aid the sale of risk. EUR/JPY had the rug pulled from under it at 126.80, and subsequently fell to 125.70 lows on the day as equities across Asia fell in tandem. Greece’s current budget shortfall looks to be estimated at almost 12.9% of 2009 GDP. News releases from China stating that top Chinese banks could face capital shortfalls as well as a mention of the government raising consumer fuel prices sent the Shanghai Stock market tumbling lower with other regional equities in tow. Yen crosses were beaten to the tune of a 120 pip drop in GBP/JPY to 142.10, and a 100 pip drop in AUD/JPY to 85.45. USD/JPY fell from early 93.25 highs to lows just under the 92.60 mark. The market continues to wait for any news out of China of a possible revaluation of the Yuan.
The EUR/USD traded sideways, but was well off of yesterday’s highs of 1.3690 as it churned in a 1.3570 to 1.3600 range. The Aussie traded lower after comments from the RBA stating that the current interest rate was “not far” from average levels, dampening the hopes those counting on a RBA rate hike next month. The AUD/USD dipped from 0.9265 to near 0.9220 lows over the course of the day.
With the Greek debt auction due ahead in the London session as well as another round of earning reports due out of Wall Street later in New York, the current risk adverse climate could remain for the short term.