Wednesday October 22, 2008 - 19:55:01 GMT
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FX Blog- USD Trading Outlook: Far East Open for October 23, 2008
USD Trading Outlook: Far East Open for October 23, 2008
- A sharp decline in the Nikkei Wednesday saw another unwinding of leveraged trades in many centers. These flows saw the JPY advance and many (but not all) of the carry trade vehicles decline.
- There is nothing more difficult than to try to pick bottoms in a liquidating market. New lows often trigger fast liquidations. Also, Hungary has moved into the cross-hairs of hedge fund raiders. There is also talk of counter-party risk on Chinese commodity contracts.
- There is a growimg lack of confidence in two key central bankers, King of the BOE and Trichet of the ECB. Kingâ€™s pronouncement Tuesday that the U.K. economy is in recession has been greeted with derision by those who have been complaining for a year that policy is too tight. Respected CBâ€™s are expected to anticipate the economy, not follow.
- The USD and JPY remain the anti-EUR currencies. The EUR and GBP have weakened sharply vs. the JPY and USD. The CHF is also weaker. Commodity currencies (CAD and NZD) are sharply weaker in line with risk aversion. The AUD has eased modestly. Lofty Australian inflation will not to halt RBA policy ease. Gold has fallen sharply.
- Crude oil prices are sharply weaker ahead of the emergency OPEC meeting Friday. Weekly energy data saw expected builds. Expectations for production cuts are seen as a sign of weakness. European bourses ended sharply weaker. U.S. shares are expected to close down sharply.
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