Commodity prices have continued to drop sending the South African Rand and Aussie dollar lower this morning. Risk appetite has taken a hit as increasing loan losses in the U.S and lower profits from companies in China saps demand for riskier assets. This has sent the dollar and Yen higher as the usual market mechanics continue to ring true. While the markets are largely anticipating the current bounce back in the economy companies are finding a hard time justifying this excessive optimism.
Yesterday President Obama was expected to announce Fed Chairman Bernanke's reappointment to another term at the head of the largest economies' finances. This news was widely expected in Asia and did little to counter the comments by Chinese President Wen Jiabao on blind optimism and the ensuing decline in stocks that brought the whole region with it. While investors largely believe conditions are getting better, more impetus is needed to keep this wave of optimism going at the risk of rekindling the bear market rally argument.
The EURUSD reacted by declining sharply, followed by a noteworthy attempt at 1.4300 but continuing downwards. The USDJPY initially traded the risk averse view but bounced off the 98.80 support. While the outlook may seem gloomier one must not discount the resilient bulls.