Risk aversion is still the name of the game. Even as a major holiday in the U.S. approaches, the markets are not in a mood to celebrate. We saw New York traders continue the trend from overnight. Carry trades and stocks continued to get hit hard. The momentum in the risk aversion trade was added to as Citigroup was downgraded to an outright sell today by a major U.S. investment bank. The downgrade came on the back of possible increased write downs from the sub-prime problems in the states. Another factor adding to the risk aversion trade was the NAHB Housing Market Index release. This number came in at 19 for the month of November versus the previous month's release of 19. This number remains at an all time low for this index. This release indicates that the U.S. housing market still has a long way to go until it recovers. As the data continues to remain negative, it will only compound the credit market worries that the worst is possibly not behind them.
These factors helped the JPY crosses trade heavy for the entire New York session. We saw EURJPY trade from near the 162.00 area and test down towards the 161.85/90 area. High yielding carry trades like GBPJPY and AUDJPY took an especially hard hit today. We saw GBPJPY trade from near the 226.80 area down to the 224.50 area and we also saw AUDJPY trade from the 98.40 area down to the 96.90 area. CADJPY also took a nice hit as commodities were sold off today. Gold traded lower all day and this helped CADJPY trade from the 113.25 area down to the 111.50 area.
There is not much on the data front this week to stem this tide of risk aversion. Perhaps the upcoming holiday will be the best chance for the markets to take a breather. Should we get more bad news out of the credit markets or further bad news from major financial institutions this week, there will be nothing to stop the risk trade from being sold.
Upcoming Economic Data Releases
- 21:45 GMT New Zealand Visitor Arrivals for Oct.; No survey, Prior was -3.2%
