Sunday 18 October 2009

Risk Aversion benefits USD & JPY

The dollar and the yen advanced at the start of the week amid increased risk aversion from a bailout proposal of the US auto industry. The equity bourses tumbled, with the Dow Jones and S&P 500 both plunging by over 3%, while the Nasdaq dipped by 2.8%. Euro Recovers above 1.32The euro edged back above the 1.32-level in the early Asian session, rebounding from Monday’s lows against the dollar to above the 1.3250-level. Traders will focus on the ECB monetary policy decision later in the week. Markets are expecting the European Central Bank to cut rates aggressively, slashing the benchmark interest rate by 50-basis points to 1%. The subsequent press conference by Bank President Trichet will also be closely scrutinized for hints of whether additional policy easing can be anticipated over the coming quarters.

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