Risk Appetite takes a blow as stocks in Asia extended the biggest drop in global equities this month

  • The Japanese yen rallies close to a six-week high against the dollar and the Australian and New Zealand dollars are set for their first weekly loss against the greenback on projections a weak global recovery will deter policy makers from raising interest rates.
  • The euro recovered against the U.S. dollar from 1.4840 to over 1.4900 on speculation the Federal Reserve will keep interest rates low to support economic growth.  The dollar was on the brink for a 0.1% advance against the euro on declining stocks before reversing its gains.  U.S. unemployment at a 26-year high leaves the Fed very little chance of raising interest rates in the near future with many investors betting borrowing costs will stay low for an extended period.
  • Bank of Japan left its benchmark interest rate at 0.1% at its policy meeting today.  The central bank also raised its monthly assessment, saying the Japanese economy is picking up.  The yen maintained its gain on the greenback following the news.
  • Borrowing costs near zero in the U.S. and 0.1% in Japan make their currencies popular for funding higher-yielding assets and currencies.

Currency to watch out for: EURUSD & GBPUSD

  • The EURUSD pivot point is at 1.4950 with a preference to enter into short positions below 1.4950
  • The GBPUSD pivot point is at 1.6700 with a preference to enter into short positions at 1.6690

Today's calendar and market movers:

  • German PPI month on month expected to rise to 0.1%
  • ECB President Trichet is due to speak at the European Banking Congress in Frankfurt

Stocks:

  • U.S. equities sink on weak technology stocks and recovery concerns.  At the closing bell the major indexes closed lower with the Dow -0.9%, the S&P -1.3% and the NASDAQ -1.7%
  • As of 07:00 the Nikkei is trading at -0.54% and the Hang Seng at -0.59%