ASIA REVIEW

The EUR’s fall late Wednesday, which dragged down the AUD and Asian currencies including the SGD. markets were reacting to the report that banks deposited a record amount in the ECB’s overnight deposit facility, a sign that additional liquidity provided by the ECB isn’t being deployed to maximum effect to ease sovereign debt problems. That bit of news overshadowed other developments that might have been viewed as risk-positive, including a smooth Italian debt auction and the U.S. opting not to pick a fight with China over the CNY’s value in the Treasury’s currency report.
in Asia EUR/USD opened at $1.2940 after NY session yesterday as fears of sovereign downgrades, a rise in o/n ECB deposits, loss of confidence in the new Greek government, and year end USD buying on the last spot settlement day of the year all took their toll on the single currency. Stocks and commodities were all drilled lower along with WTI crude. EURO fell to lows of $1.2912 in NY and then again this morning to $1.2887 before rumours of Asians sovereign bids led a bounce back to $1.2938, GBP eased from early highs of $1.5463 to $1.5428 and EUR/GBP from stg0.8377 to stg0.8350. USD/JPY failed to maintain a foothold above Y78.00, slipping from Y77.99 to Y77.77. EUR/JPY folded from Y100.93 to Y100.35 on heavy sales out of Tokyo into the fixing, before later bouncing to Y100.65 assisting EUR/USD recovery. AUD showed a bit more resilience, recovering from a fall to $1.0044 to bounce back to opening highs of $1.0101. Focus today will be on the 8.5 bln euro 3 and 10 year Italian auctions, German CPI’s and E17 M3.