Article / 12 April 2017 at 7:00 GMT

Morning Markets: USDJPY heads below 110.00 as risk sentiment plunges

Senior Editor / Saxo Bank
Denmark






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Watchlist

  • UK: Monthly unemployment figures (0830 GMT)
  • Portugal: CPI (1000 GMT)
  • South Africa: Retail sales (1100 GMT)
  • Brazil: Retail Sales (1200 GMT)
  • Canada: Bank of Canada interest-rate announcement (1400 GMT)
  • US: EIA weekly petroleum status report (1430 GMT)

The risk-off wave sweeping markets continues to push the Japanese yen to new heights, and today's Asian session saw USDJPY breach the 110.00 handle on its way to 109.42, the lowest level seen since November 17, 2016.

Another big mover in Asia was the South Korean won, which gained 0.3% versus the dollar to 1,141.52. The currency's surge came as the South Korean finance ministry stated it would "take action" if the ongoing tensions surrounding its northern neighbour continue to spike market volatility.

Pyongyang, for its part, has said that it will respond with unlimited force to any "provocations" from the US carrier group nearing the Korean coast.

Beyond North Korea, the world's other main geopolitical flashpoint remains Syria in the wake of the US' recent airstrike. President Trump, however, said late Tuesday that Washington is not planning a "regime change" war on Damascus, but the ongoing uncertainty has still led the VIX volatility index to continue pushing higher while both Brent and WTI crude rose 0.3% overnight.

European equity futures point to a green open on the Continent while US exchanges are expected to head lower following today's New York open.

The Bank of Canada is expected to hold interest rates steady today.

Market signals

Asian session

  • The VIX climbed to its highest level since November as North Korean-US tensions rose
  • Supply issues and talk of a Saudi push for extended Opec output cuts buoyed oil prices
  • Spot gold prices hit highest level since November 2016, adding 0.1% to $1,276.10/oz
  • The yield on 10-year Treasuries fell one basis point to 2.29%
  • Safe-haven sentiment has impacted gold, US treasuries and currencies
  • Electronics giant Toshiba warned that its future is in doubt in its unaudited results release
  • China's Producer Price Index slowed to 7.6% in March amid steel glut concerns
  • The Bank of Canada is expected to leave rates unchanged at 0.5% in its decision today
  • Donald Trump offers China a good trade deal if it helps fix the North Korea crisis
  • Japanese stocks fell to their lowest in more than four months on Wednesday
  • The Nikkei 225 share average dropped 1.3% to 18,506.17 in mid-morning trade
  • South Korean shares were steady after a six-day selloff
  • The S&P/ASX200 fell in early trade but returned to parity at about 0525 GMT

Forex ahead

  • The JPY rose 0.2% to 109.62 against the dollar as of 0655 GMT
  • AUD clawed its way back to 0.7500 before retreating; it was worth 0.7491 at 0655 GMT
  • USDCAD is retreating with the pair plunging toward the 1.33 handle as of 0655 GMT
  • EURUSD rebounded in the Asian afternoon, and trades above 1.06 into the European open.

From the Floor

Safety dance. "Today we have seen very broad-based safe-haven moves," says Moltke-Leth.

Protection play. "We believe the market is using the very front end of the [FX options] curve to finance protection for the French election," says Larsen.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1... 2... 3
Today’s labour market update shouldn't change the cautiously upbeat outlook for the UK, although pessimists are looking for bad news to blame on Brexit, says James Picerno

Flight to safety
Tensions over Syria and North Korea weighed on Asian markets, and investors turned to the safe havens of the yen and gold, writes the Saxo APAC Sales Trading team.

German strength
A 17-month high for Germany's ZEW confidence indicator boosted the euro and Bund yields despite poor February industrial production figures from the Eurozone, says Michael McKenna.

Ottawa

 Ottawa business district. The Bank of Canada decides on interest rates 
on Wednesday. Photo: Shutterstock

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