The currencies that were punished the most by the weak US data was the Yen crosses.
Fear that a slowdown would hit the global economy caused the Dow to drop 277 points to a new 9 month low. This pushed the dollar to a 2.5 year low against the Japanese Yen and the British pound to a 1.5 year low. Risk aversion is rising around the world not only because of the ripple effects of slower US growth, but also because the leading banks on Wall Street are continuing to issue bearish news. Citigroup announced the biggest loss in the bank’s 196 year history, days after Merrill Lynch announced a significant write down. Earnings season has just begun and the fear is that more bad news will surface. Even continual investments by Sovereign Wealth funds fail to help the stem US equity market losses. It is too early to pick a bottom. If anything, carry trades are prime for further losses. There are a number of Japanese economic releases due for release this evening. Although they are important, their market moving potential at this point is minimal.
