Risk aversion was in full swing to start the week in Asia as fallout from Friday's Goldman Sachs fraud accusations from the Securities and Exchange Commission continued to rock the financial world. Currency markets gapped in the favor of safety on the open and equities were in the red for the day as traders tried to digest the news of the SEC actions and waited for possible further measures from Germany and the UK. The financial giant has been accused of defrauding clients in connection with the sales and marketing of mortgage related derivatives. A newspaper article that stated the SEC is currently investigating further financial culprits added to the selloff of risk in the session. Some investors believe this could be the awaited trigger that corrects the recent surge in equities and higher yielding currencies.
EUR/USD gapped about 30 pips lower on the open to near 1.3470 and proceeded to shrink to 1.3445 lows over the course of the day, leading the pack in the flight to safe haven currencies in the dollar and yen. Yen crosses, which began their decent on Friday, all continued on that same path, with the EUR/JPY dropping about 60 pips to 123.67 lows, and the GBP/JPY dropping a whopping 130+ pips to open at 140.40 with subsequent lows just shy of the 140.00 big figure. AUD/JPY dropped from 85.20 to 84.35 for the day while the high flying AUD/USD which closed near 0.9245, opened near 0.9210 and fell to lows near 0.9175.
In the UK, Liberal Party leader Nick Clegg continued in the spotlight after the Cinderella story dazzled his country at recent three party debates. Some polls have even showed that Mr. Clegg is more popular that Winston Churchill, which although an honor for him, is clouding the election outlook for the May 6th elections and causing grief for the British Pound. The GBP/USD pair was dumped by a big figure on the open, and continued to shed an additional 50 pips to 1.5224 lows. Recent polls show the potential of the upcoming election producing a hung Parliament which has signaled instability for the UK currency.
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