Forex Market Update: U.S. Dollar Bounces Back as Financial Fears Intensify

The USD regained ground in Asia, with the fall in the EUR/USD the key catalyst behind the broad USD gains. Traders reacted to an article in the Telegraph that cited the warning from Germany’s BaFin that German banks could have up to EUR200 bln in toxic debt. The original report from BaFin was out last week in German but only garnered notice today, pushing EUR/USD from highs of 1.4023 to lows of 1.3944 before bouncing to 1.3984 ahead of the London open. USD/JPY rallied to highs of 95.08 early in the session on fresh reports that N. Korea may be preparing more missile launches, and then slumped to lows of 94.61, weighed down by the sell-off in EUR/JPY on the EUR/USD decline. Still, despite the USD bounce, price action is still merely consolidating the recent USD sell-off. Asian stock markets were mixed with Japan and Seoul weaker on the N. Korean threat. Oil eased under $61.00 after Saudi Arabia discounted any change in output at the OPEC meeting. U.S. Treasury yields maintained last week’s gains with the market waiting for the large U.S. bond auction this week.