Middle East unrest concerns are keeping demand for safe-currencies strong as the Dollar and Yen strengthened against most currencies on fears of contagion spreading. EURJPY declined from a three-month high of 114.05 to trade at 113.61 as Asian stocks fell on warnings of civil war unrest following attacks in Libya, EURUSD fell for the first time in four-days to low of 1.3667 as Germany's ruling party suffered its worst defeat since WWII, USDJPY traded at low of 83.03, GBPUSD traded at a low of 1.6227, AUDUSD traded at 1.0115, NZDUSD traded at a high of 0.7651 as outlook for payout to farmers increased, boosting NZ's economic recovery. Safe currencies could see further boost if Middle East tensions escalate and could provide near-term support for the Yen and the Dollar while US markets remain closed on account of President's Day.
Asian stocks snapped three days of gains after China implemented further measures to counter inflation by hiking its reserve ratio by 0.5%, 10 days after hiking interest rates as MSCI Asia Pacific index dropped 0.1%, Hang Seng dropped 0.25%, Shanghai Composite rose 0.95% while Nikkei rose 0.15% to its longest winning streak in more than a year as oil prices were boosted and Bridgestone jumped 5.8% after Goldman Sachs upgraded its ratings to 'buy'. Asian currencies weakened as China increased measures to counter inflation, concerns that Middle East tensions could spread across the region keeping investors nervous and markets expect the Chinese Yuan to slowdown after the G-20 meeting. Thailand's economy strengthened 1.2% in Q4 2010, fastest expansion in 15 years on increased consumer spending and exports adding to central bank's case to raise rates which could boost Asian currencies further.
G-20 meeting over the weekend saw agreements on a set of economic indicators that could measure global imbalances which include public debt, fiscal deficit, private debt, savings rate and trade balance and net investment income flows and transfers overcoming Chinese opposition as the US and Europe sought further strengthening of the Yuan which has been creating global imbalances in the FX markets. inflation remains the top concern for most economies as ECB's Smaghi spoke saying that rise in food prices may be permanent and as the economy gradually recovers and inflationary pressures rise, monetary policy has to be measured while ECB President Trichet said that rising commodity and energy prices are being watched 'very, very closely'.
Germany releases manufacturing and service sector data along with the EU apart from IFO business climate and expectations sentiment. US markets remain closed today.