SubscribeDaily Futures Commentary August 17, 2009
Monday, August 17, 2009
Risk aversion returned to the foreign currency markets overnight triggered by a sell-off in Asian equity markets. Early today, it was reported that Japan’s economy grew in the second quarter, but the rate was less than expected. Although this news signaled the end of the recession, sellers still felt the need to liquidate long equity positions as the gain did not meet economists’ expectations.
The news regarding the Japanese GDP was the first report of growth in the economy in 5 quarters. It reflected both growing exports and the effects of government stimulus. Traders for the most part ignored the report and instead focused on the breaking stock markets for direction. Many traders are reluctant to commit to a long Yen until the economic numbers prove to be sustainable. It’s one thing to end a recession and another to maintain enough momentum to sustain a recovery.
The Chinese market led the sell-off as investors fled stocks for the safety of lower-yielding currencies such as the U.S. Dollar and Japanese Yen. The Japanese Yen is actually up versus the Dollar as investors repatriate funds removed from U.S. equity markets. …
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