Nervous Markets Fuel Safe-Haven YEN
Traders still remain very concerned after China’s largest bank stopped rolling some loans yesterday although it does not plan to freeze new lending. These measures are basically intended to slow credit growth but could have a secondary impact by also restricting demand and growth from other countries.
The YEN rallied broadly as a result with the USDYEN now posting 89.40 whilst the EURYEN registers 125.45 at present.
The US Federal Reserve will be completing its two-day policy meeting but is expected not to introduce any new policy changes when it releases a statement later today. This event has been overshadowed by speculation concerning Bernanke’s re-appointment.
During the night, a key Eurozone official voiced concerns about the overvalued Euro when compared to the US Dollar and Chinese Yuan. In addition, fiscal concerns about Portugal and Greece are still ever present.
Consequently, the EURUSD continued to decline during the night by hitting lows of 1.4020 before rebounding to its present value of 1.4050 (see hourly Chart).
The Markets will be closely watching Obama’s State of the Union speech scheduled for later today. The President is expected to announce new budget deficit controls and may also include further statements concerning bank regulation to those he made last week.
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