Asian markets drop as Yen strength weighs on exporters ~ Forex Special

Wednesday, August 11, 2010

Asian markets drop as Yen strength weighs on exporters

Forex Special (Barcelona) - Asian markets have traded on sell tone on Wednesday with Japanese companies, whose activity is strongly dependent on exports, weighed by Yen strength, which makes their product more expensive overseas. In FX Markets, the Yen pared losses against the Dollar.

Japanese Nikkei Index plunged more than 2.5% as the Yen picked up against the Dollar, while South Korean Kospi Index shed 0.8% and Australian S&P/ASX Index dropped 1.2%. Markets in India, Singapore Taiwan Indonesia and New Zealand have also gone through declines.

Wall Street picked up from session lows at the end of Tuesday's session although the Dow Jones Index closed 0.5% lower following the Federal Reserve's monetary policy statement where the Bank announced its intention to buy government debt, at small scale, with its mortgage securities investments.

With this action, the The Federal Reserve expects to send long-term rates and mortgages to lower levels, and increase lending to consumer and businesses in order to boost economic recovery, which, according to the Bank's statement, has lost pace over the last month.

Dollar drops against Yen

USD/JPY gave away most of the ground taken during the previous three days, and recovery from 85.00 low on Aug 6 was capped at 86.25 yesterday, to plunge after the release of Fed statement dropping to 85.18 low, to consolidate between the mentioned low and 85.45 during Asian trade.

EUR/USD decline from Friday's high at 1.3335 found support yesterday at 1.3075, and the pair soared after the Fed to 1.3225, to pull back gradually through Asian session and return to levels right above pre-Fed price, 1.3075 ahead of the European opening.

GBP/USD retreat from 1.6000 resistance area tested on Monday, found support at 1.5710, and the Pound rallied on Dollar weakness post Fed, to hit session high at 1.5910 and pull back during Asian Trade, returning to levels right below 1.5800.