Asian Session – Yen weakens after Turkey rate hike eases EM market jitters
January 29, 2014 7:42 am
Markets were stunned by news out of Turkey late on Tuesday that its central bank decided to raise its key overnight lending rate from 7.75% to 12%. This helped bring risk appetite back to investors after last week’s panic from the emerging market turmoil.
The dollar was the main beneficiary of flows and gained on the euro and the yen as investors pulled out of safe haven currencies. Last week there were fears triggered by a slowdown in China which affected emerging market currencies, raising concern of a spillover effect to developed countries.
There was a relief rally in the dollar/yen on the Turkish announcement, with Asian markets being the first to react to the news. The dollar gained 0.30% to 103.26 yen. Against the euro, the dollar gained 0.05% to 1.3661.
The Australian dollar rose after the knee-jerk reaction to the news was to buy risk assets. The aussie gained 0.36% to climb to 0.8808 against the greenback.
Sterling was calm during the Asian session, trading a tight range between 1.6560 and 1.6586 against the dollar. Anticipation of the Bank of England Governor Mark Carney’s speech in Edinburgh later today is keeping the pound subdued.
Meanwhile, markets now turn their attention to the Fed as it concludes its two-day policy meeting later today. There are expectations the Fed will scale back its stimulus further. After reducing its bond buying program from $85 billion to $75 billion per month beginning in January, it is expected to scale back bond purchases for a second time, to $65 billion per month.
Markets were stunned by news out of Turkey late on Tuesday that its central bank decided to raise its key overnight lending rate from 7.75% to 12%. This helped bring risk appetite back to investors after last week’s panic from the emerging market turmoil.
The dollar was the main beneficiary of flows and gained on the euro and the yen as investors pulled out of safe haven currencies. Last week there were fears triggered by a slowdown in China which affected emerging market currencies, raising concern of a spillover effect to developed countries.
There was a relief rally in the dollar/yen on the Turkish announcement, with Asian markets being the first to react to the news. The dollar gained 0.30% to 103.26 yen. Against the euro, the dollar gained 0.05% to 1.3661.
The Australian dollar rose after the knee-jerk reaction to the news was to buy risk assets. The aussie gained 0.36% to climb to 0.8808 against the greenback.
Sterling was calm during the Asian session, trading a tight range between 1.6560 and 1.6586 against the dollar. Anticipation of the Bank of England Governor Mark Carney’s speech in Edinburgh later today is keeping the pound subdued.
Meanwhile, markets now turn their attention to the Fed as it concludes its two-day policy meeting later today. There are expectations the Fed will scale back its stimulus further. After reducing its bond buying program from $85 billion to $75 billion per month beginning in January, it is expected to scale back bond purchases for a second time, to $65 billion per month.
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