FX markets have entered the holiday season on a quieter note as majors traded in tighter ranges relative to last week's record swings. Risk appetite is largely subdued and most indices in the Asia-Pacific region are in negative territory, with the notable exception of the Nikkei which is positive despite more disappointing data out of Japan. The announcement by the White House last week regarding the provision of an emergency US$17.4bln loan to the US car industry has certainly helped steady sentiment around the world and removes a key short-term event risk heading into year-end. This could see significant fallout at the end of the first quarter when the markets begin to realize how massive this global financial restructuring is and will be, which will knock heads and rattle cages and drain accounts as the tsunami wave 2 hits. This global crisis will not end overnight and we've much more excitment to keep is getting out of bed in the morning. Forturnately, if you know what you're doing, FX is one of the only sectors to make money in this market. That is, of course, you can manage risk like the professionals... ahem, prudent professionals... not like the former wall streeters.

The dollar was steady in a range of 1.3911-1.4048 against the euro and 89.10-90.24 against the yen. Crude prices are also slightly firmer on the back of recent developments.
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Tags: Financial Crisis

RBA Cuts Rates to 4.25% - Ref: UBS

Risk sentiment deteriorated further amid the unsurprising, but official confirmation for the US being in a recession, less constructive commentary by Fed Chairman Bernanke, and poor macroeconomic data. According to the National Bureau of Economic Research (NBER) the current recession began in December 2007, due in large part to the decline in jobs. The recession is likely still ongoing, as recent data has been getting worse. Fed Chairman Bernanke highlighted that the US economy remains under considerable stress and that more rate cuts are possible. He also noted that the scope for reductions to aid growth remains limited at this point. Bernanke alluded to quantitative easing (QE) like policies such as buying longer-dated Treasurys and agency debt as a way of injecting liquidity. His comments, while not explicitly mentioning QE, drove down long-term yields, consistent with the experience in Japan when it engaged in QE. The 2y Treasury yield is 0.88% and 3.22% on the 30y Treasury. The 2s10s Treasury curve is now 183bp, down from the mid-November high of 262bp. On the data front, the manufacturing ISM for November fell another 2.7 points to 36.2, following sharp declines in October and September. Read More...

Tags: Financial Crisis

The dollar was undermined on Friday by falling risk aversion, with the S&P500 rising by 2.9%. In this context, EURUSD has risen to a high of 1.2833 in the US session from a low of 1.2718 and has subsequently traded even higher this morning to current levels around1.2850. Meanwhile, credit markets look to be normalising further - the 3-month spread between OIS and Libor for the US dollar fell to 1.76%, from 1.83% on Thursday. Read More...

Tags: Financial Crisis

The Dow closed 203.19 points lower at 8,175.77. The S&P 500 fell 27.85 points to 848.92. Equities had spent much of the day in positive territory but plunged in the last half hour, dragged down by energy shares as oil gave up its gains. Oil closed at $63.22/barrel, down 1.45%, having risen as high as $65.77 intraday.
US September new home sales +2.7% m/m, after a 12.6% decline in August (preliminary August -11.5%).
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Tags: Financial Crisis