Euro tumbles after ECB announcement

USD/JPY and the JPY complex endeavored to push lower, especially after Gotobi demand at the Tokyo fix was sated. USD/JPY fell from 117.35 to 117.02, weighed down by the 1%+ push down in the Nikkei and lower US yields on risk-off sentiment following the ECB announcement on Greek debt. From a NY close of 1.802%, the yield on US Tsy 10s fell to 1.735% by the Tokyo open. JPY cross buoyancy and news of reflationist Harada’s formal nomination to the BoJ’s Policy Board (after the to-do yesterday on the news leak) helped USD/JPY back up to 117.44. The Nikkei also pared some if its earlier losses in PM trading, and this helped as did bids ahead of large, expiring 117.00 vanilla options. Trading soggy initially, EUR/JPY bounced from 132.57 to 133.43 though market concerns over Greek debt remain. GBP/JPY was less affected by the ECB-Greece news, and bounced from 177.68 to 178.52. AUD/JPY grinded up from 90.71 to 91.44 on talk of some Japan investor flows. NZD/JPY bounced from 86.05 to 86.72. With the market focus obviously elsewhere and little to change the current Japan scenario, more USD/JPY and JPY complex to-fro seems likely.

EUR/USD got off to a fiery start in Asia after the ECB announcement late in the US day that they were ending the ratings waiver for Greek debt. EUR/USD (and the EUR complex) literally collapsed from 1.1425 to 1.1347 at the Asia open and on to 1.1304 before bids returned. EUR was already under pressure in US trading on renewed weakness in NYMEX crude. From the low, EUR/USD slowly recovered to 1.1363. Two views have emerged regarding the ECB decision. EUR bears suggest the move merely highlights the irreconcilable divide between Greek-EU authorities. EUR bulls suggest the move could provide the catalyst to speed up an agreement.

GBP/USD fell in sympathy with EUR/USD after the ECB-Greece news but in a more limited fashion. From a low of 1.5165 post-news and 1.5170 early in Tokyo, cable bounced to 1.5213. EUR/GBP steadied between 0.7450-75.

USD/CHF did little, soggy between 0.9227-67 but on little volume. EUR/CHF steadied between 1.0472-1.0505 after the leg down after the ECB-Greece news.

AUD/USD opened in Asia at 0.7754 and see-sawed between 0.7733-78 early, buffeted by the ECB-Greece news. Soft retail sales data helped it down to the low (details were more mixed however). Consistent buying by some Japanese players looking for yield saw it later grind up to 0.7792. Despite this week’s RBA OCR cut and expectations for more at the next meeting or two, AUD yields remain an attraction for many eyeing zero or negative rates elsewhere.

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