Despite initial rebound from 1.2314 to 1.2445, euro then retreated from there and intra-day decline accelerated after German financial regulator announced a ban on naked short-selling of Germany's most important financial institutions, CDS on euro government bonds and euro government bonds and the ban would take effect from May 19 to Mar 31, 2011. The single currency eventually nose-dived to a fresh 4-year low of 1.2161 on speculation that such measure would encourage more traders to bet against euro as traders ran out of alternatives to trade the sovereign-debt crisis. Cross-selling in euro especially against the Japanese yen also pressured euro as eur/jpy tumbled from 115.50 to 112.08.
In other news, EU officials said Greece received a 14.5 billion euro loan from them and some of the money would be used to repay 8.5 billion euro bond maturing on Wednesday. European finance ministers said only countries with high budget deficit such as Greece, Spain and Portugal would be ordered to make additional deficit cuts but budget policies will remain untouched in better-off nations such as Germany and Finland.
Although the British pound rebounded on talk of M&A demand and hit an intra-day high of 1.4522 after U.K. inflation unexpectedly surged to a 17-month high in April , cable then fell in tandem with euro and tumbled to 1.4304 in NY afternoon on broad-based strength in dollar. On economic front, U.K. consumer price rose by 3.7% in April versus economists' expectations of an 3.5% increase and above 3.4% rise in March.
The Japanese yen rallied across the board as selloff in euro together with weakness in U.S. stocks sparked broad-based risk aversion again, prompting investors to dump riskier assets like commodity currencies and stocks for yen and dollar as safe haven currencies, aud/jpy tumbled from 81.64 to 79.51 while gbp/jpy slumped from 134.81 to 131.87 and usd/jpy also dropped from 92.97 to 92.10.
Nzd/usd extended recent weakness and fell to 0.6889 on Wednesday's NZ/AUS session after the central bank said gradual depreciation of the NZD is desirable in the Reserve Bank Financial Stability Report.
Economic data to be released on Wednesday include: Japan Capacity utilization, Industrial production, Canada Wholesale sales, U.S. CPI and FOMC minutes.