Safe-haven currencies gained further on concerns of Egyptian crisis worsening and Asian market declines and most of the Asian currencies declined. EURUSD declined to lows of 1.3552, USDCHF moved to highs of 0.9697, GBPUSD dropped to 1.6036, USDJPY rose to highs of 83.52 on expectations of consumer confidence in the US rising while the AUDUSD fell below parity to low of 0.9970 as RBA intends to keep interest rates on hold.
Asian markets declined on political concerns in North Africa and on concerns that accelerating inflation levels could spur higher rates with the MSCI Asia Pacific index except Japan dropped 1.4% while Shanghai Composite rose 0.3% and the Japanese markets were closed for trading today due to a holiday. Stocks extended losses after the Chinese policy makers adjusted the reserve requirement ratio on some of the nation's small and medium- sized lenders after January loan growth surged and amid lower-than-estimated earnings from Rio Tinto Group to Newcrest Mining Ltd. China's central bank raised interest rates this week for the third time in four months, joining India, Indonesia, Korea and Thailand in having boosted borrowing costs this year. The South Korean won weakened 0.9% to 1,126.70, erasing earlier gains, after the Bank of Korea unexpectedly held off from raising interest rates today against forecast that the BOK would raise its interest rate by 0.25% to 3% to help tame inflation.
There are contagion fears that the Egyptian crisis could spread to other Middle East countries and demand for safety has picked up considerably as President Mubarak refused to step down, only to delegate powers until elections in September. RBA Governor Stevens said that it was sensible to keep rates on hold until mid-year or even longer as he opts for a wait-and-watch policy as he asses the unemployment and inflation levels for further growth.
The University of Michigan's consumer sentiment probably rose to 75 (prev. 74.2) due out today and the U.S. trade deficit probably widened in December for the first time in four months which could keep the Dollar buoyed after yesterday's economic data showed jobless claims dropped 36,000 to 383,000 thus showing further improvement in the labor market after unemployment rate declined to 9%, lowest in 21 months.
Today's calendar includes German inflation reports, UK producer prices and US consumer confidence and trade balance figures.