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Asian Session – Euro rout continues; Korea cuts rates while New Zealand holds

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RBNZ1The euro was again weak today, as euro / dollar briefly traded below the 1.05 to mark a low of 1.0494 as the single currency failed yet again to find a bottom.  As recently as a few days ago on the previous Friday, prior the announcement of the US employment report, the euro was trading above 1.10.  The euro managed to rebound to 1.0581 in subsequent trading.

The euro’s lows against sterling and the yen, at 0.7011 and 127.61 respectively, which were made yesterday, managed to hold when tested during the Asian session.  Some analysts are pointing out that the euro on a fundamental basis is looking undervalued although capital flows away from Eurozone bonds will continue to hurt it in the short-run.  Furthermore, there was optimism that European stock markets would continue to rally as was the case in Japan when it embarked on its QE campaign back in 2013, which led to a massive depreciation of the yen and a big rise in the Nikkei stock index.

In New Zealand, the Reserve Bank decided to hold rates unchanged at 3.50% – as expected – but was not as dovish as the market expected, resulting in a big move in the kiwi.  The kiwi rose to as high as 0.7393 in the hours following the decision from the 0.7091 prior to the decision’s announcement.  The RBNZ Governor stressed that New Zealand would not follow the example of other countries that had cut rates aggressively and adopted a neutral stance with respect to future policy changes.

In Australia, the country’s employment numbers were a touch better-than-expected as unemployment came back down to 6.3% from the previous month’s 6.4% level and total employment grew in line with expectations at a 15.6 thousand pace.  The aussie did not appear to react too much to the release of the numbers, although as there was some profit-taking on the US dollar’s recent gains, it managed to climb back to 0.7665 from around 0.7565.

In other news, the Bank of Korea cut interest rates by a quarter of a percent to 1.75%, which boosted optimism in Asian share markets that loose monetary policies would be followed across the region.

Looking ahead, UK trade balance and retail sales from the United States will be closely watched.

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