JPY and Dollar gains again dominated Asian trading on Tuesday. Initially, swine flu concerns helped foster JPY cross sales, particularly with Japanese corporate, speculators and investors squaring up ahead of the Showa holiday Wednesday and with the focus on the upcoming Golden Week holiday. But, JPY cross sales accelerated on the report from the Wall Street Journal that U.S. regulators are pushing Citi and Bank of America to raise capital. USD-JPY, which had been capped at 96.61 during the morning session, fell to lows of 95.98. EUR-JPY, which had been above 127.00 in NY trading, was unable to rise above 126.00 in early Tokyo due to cross sales and dropped as low as 124.65 by the afternoon. EUR-USD, which fell sharply from 1.3125 to 1.3000 in NY on ECB Nowotny’s comments, consolidated around 1.3000-1.3031 much of the session, supported by Asian buying, before slumping to lows of 1.2984 on the accelerated EUR-JPY cross sales. Asian stock markets were mixed but turned lower or extended losses on the WSJ story. Treasury yields fell on the news and commodities were under broad pressure on risk aversion with oil under $50 on NYMEX.
Session began with traders looking to drop risk and buy the protection of the USD. It looks this has been the tendency over the last some days of trading and the market seems pretty happy to take it through. The US and the European calendar remain silent, as there are no significant reports planned.