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Forex Sells Off as Fear Grips Asia

Last updated 2/12/2009 8:48 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Asian equity markets were all sharply lower despite news that US bailout package was nearing passage as traders questioned the efficacy of US efforts to stimulate its economy. Nikkei dropped by more than 2% as did the Hang Seng while Korean equities also finished lower despite the fact that Bank of Korea cut rates to a historic low of 2%.

The disappointment over the hodge-podge of  measures agreed to by the US senate, along with the lingering doubts over the still developing and unclear plans to rescue the US financial sector, carried over into Europe with most bourses there dropping more than 1% from yesterday’s close. Anxiety appears to be the order of the day as the “hope” rally quickly fades and the lofty rhetoric of politicians is squashed by the harsh reality of the continuing global economic crisis.

The impact in the FX market was most pronounced on the risk currencies today, with cable in particular taking it on the chin as the unit dropped below the 1.4100 handle on massive EUR/GBP buy flows. FX traders continue to worry about the impact of quantitative easing on the currency and should risk aversion theme dominate for rest of the day the stops at 1.4000 will no doubt be targeted especially if US equities follow the rest of the world with a  triple digit sell off later in the day.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.