Range: 1.2912 – 1.2992
The market has reacted to reports from Japan Finance Ministry Noda that they plan to buy 20% of eurozone bonds to be issued by the EFSF. However, this initial reaction was tempered as Noda added that euros already in Japan reserves would be used for the investment. Rate eased off highs, settling around $1.2945 ahead of the European open. Eurozone peripheral funding continues to be the main focus. Portugal’s bond auction on Wednesday is awaited, ahead of Spain and Italy auctions on Thursday. Data calendars remain light with focus looking to UST yield for direction. One bank has highlighted the correlation of euro-dollar moves with US-Germany two-year spreads.
Range: 0.9821 – 0.9947
AUD/USD opened in Sydney at $0.9956 and came under pressure from the start on worries that China may have to tighten and the flooding in Queensland may impact heavily on the economy causing a delay in future RBA hikes. Traders are now eyeing the $0.9800 support levels. Euro-Aussie rallied strongly from opening levels around A$1.3009 on Japan MOF Noda’s comments regarding buying of euro bonds. This, combined with the flooding situation, sent the cross flying to a high of A$1.3143 before later extending to A$1.3174. Aussie-kiwi plunged from a NZ$1.3037 open to NZ$1.2943.
Range: 82.68 – 83.16
Asia opened at Y82.70 today, ranging between Y82.68 and Y83.14. Both the dollar and euro benefitted early in Asia this morning, assisted by comments from the MOF’s Noda stating that Japan was planning to buy euro bonds. The cross rallied post fixing from Y107.30 to Y107.87 on the announcement, giving a welcome additional boost to the dollar which broke back up through Y83.00 to Y83.14, but this was later tempered by additional comments that purchases would be made from euro denominated reserves, taking the gloss off the news and easing the cross to $107.50.