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Asia Market Update

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Risk Aversion Slows Following the RBA's largest rate cut in 16 yrs

Tue, Oct 7 2008, 08:00 GMT
by Eben Esterhuizen

TradeTheNews.com

Forex: Major FX pairs remained rangebound for much of the Asian session before Reserve Bank of Australia delivered a shot heard around the world. In what is rumored to mark the start of a coordinated global easing, Aussie central bank surpassed consensus estimates of a 50bps cut, slashing overnight lending rates by 100 points to 6.00%. After initial knee-jerk selling in AUD that pushed AUDUSD toward critical 0.70 support levels, renewed risk appetite forces reversed major currency trends across the board. USD Dollar saw broad losses against the EUR, GBP, CHF, CAD, AUD, and NZD. Meanwhile, risk-gauging Japanese currency pared a full figure against the dollar, with USDJPY rallying above 103 handle. GBPJPY rose 300 pips in RBA aftermath above 181 figure and EURJPY broke above 140. Emerging Asian markets FX was mixed with USDSGD shedding a full figure before finding support just below 1.46 while USDTWD maintained dollar bullish tone.

- Asian Equities: Asian equities move higher across the board following the RBA's larger than expected rate cut. During the morning session, the Nikkei 225 declined by more than 5% and at one point moved below 10,000 for the first time since December 2003. However equities have since moved off of the session's worst levels. Declines on the Nikkei are being led by exporters. However, defensive buying was noted in the shares of food companies. Additionally, Japanese banks have moved sharply off of the session's worst levels. The S&P ASX 200 is higher by more than 2%, after trading sharply lower during the earlier parts of the session. Gains in Australia are being led by banks, property companies and miners. The Kospi is higher by more than 0.50% and also reversed the losses seen earlier during the session. In other Asian equities trading, the Shanghai Composite is lower by more than 1.5%, the Taiex is gaining by more than 0.50% and the Straits Times is gaining by close to 2.4%.

- Commodities: Crude oil prices are higher by more than 2%, tracking the stronger EUR and the rebound in S&P 500 futures. Additionally, it was reported in the press that Beijing planned to raise its prices for gasoline and diesel by 3-4%, in a move to help local refiners. Other factors that could be support oil prices include the approach of Tropical Storm Marco, which could become a hurricane before making landfall. Marco has formed in the Southern Gulf of Mexico near various Mexican oil fields and it has caused Mexico's Pemex to shut 6 of its wells on one of its gulf platforms. Spot Gold is little changed, after gaining more than $32 during the US session.

Published on  Tue, Oct 7 2008, 08:01 GMT