Final Day of the Decade

As the decade comes to a close, Asian trading session continues to be defined by thin liquidity. USD fell against all G10 currencies especially NZD. Spot Gold traded higher to $1100oz while EURUSD traded sharply up to 1.4440. Carry trades found strong buying interest, despite the Tokyo holiday, as the EURJPY moved up to 133.14 from the opening level around 132.52. Comments from Chinas officials hit the wires today as regulator (SAFE) said in a statement on its website that the CNY exchange rate is not pegged to the U.S. dollar only, but refers to a basket of currencies. While the PBOC said that China will keep monetary policy loose in 2010. China officials also reacted publicly to the US trade panel decision to approve duties of 10-16% on China made steel pipes, prompting rumors of “trade war”. The IMFs quarterly report was released yesterday regarding the currency composition of international FX reserves in Q3. It showed that the percentage of USD denominated assets had fallen to 61.65% the lowest level in a decade. USD bears will quickly point out this fact as evidence of the greenbacks declining importance. However majority of the decreases can be account for in the USD depreciation and valuation effects on reserve composition. But the broader downward trend in the USD relevance cannot be denied and central banks diversification from USD (especially in emerging asia) will continue to weigh on the USD in longer terms.

In the US session, initial jobless claims will be released and the market is expecting a subtle reversal in the downward trend seen recently.

AC Markets
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