Historic Day for the Yen...

A violent day in the history of the Japanese Yen as the currency saw a colossal move that sent it to record highs of 76.25 against the dollar. In the transition between late New York and early Asian trading, the USD/JPY pair slipped through massive stops near 79.30 and didn’t stop until 3 big figures later. The move saw the yen crosses follow right behind as they tugged the majors lower during the slide, with EUR/USD dropping over 350 pips to 106.60, GBP/JPY shedding over 400 pips to under 123.00, and AUD/JPY seeing a bottom near 74.50 on a 340 pip slide. The moves were attributed to a combination of massive stops, thinned markets, and traders in need of yen to settle up on margin calls.

But just as dramatic as the climb was for the yen, the fall lower came in a not so distant second in the drama department…Traders rife with fear of Bank of Japan intervention at these record levels bought up USD/JPY, bringing the pair back over the 78.00 big figure as the yen once again sagged against its counterparts. The intervention that was so readily expected never came, but the fear of such action is still present in the markets. The weakening yen saw the crosses as well as risk firmer for the remainder of the day. All of this played out against the backdrop of the ongoing nuclear saga at the Fukushima power station. Although there seems to have been some progress in the containment of the disaster, the story here is an unfinished one that has the world on edge.

Amidst all of the pessimism of Japanese markets, the nation’s equity markets were able to turn around some big early losses of over 4% to close out the day down by about 1%. With this we also have S&P futures firmer heading into London, certainly a good sign. With the weaker yen boosting the crosses, the EUR/USD, AUD/USD and GBP/USD all saw significant gains by days end. The EUR/USD recouped 60 pips to 1.3930, while the AUD/USD saw a big figure move to highs near 0.9830. USD/CHF remained between .8960 and 0.9060 after a 150 pip drop to 0.8930 late in New York.

Today’s session was surely one that will be talked about for years to come, and thankfully for Japan, tomorrow will be the last trade day of this catastrophic week. The obvious is to keep an eye of the unfolding nuclear events in Japan. As well, the turmoil in Bahrain is slowly gaining momentum and should be watched closely.

Source: FOREX.com

17.03.2011