Euro Remains Near 2-Month Low After ECB Statement, Japanese Yen Rises on Risk Aversion

Market Reviews

The Japanese yen is rising again, as caution in the market persists amid rising tensions in trade, budget problems in Italy, and geopolitical uncertainty. The yen is trading as the strongest one, together with British pound. The US dollar is trading narrowly against most major currencies, as investor appetite for riskier assets remains shaky. The euro remains at a two-month low after the European Central Bank failed to convince markets that interest rates would rise.

On stock markets, US equities staged a strong rebound overnight. DOW closed up 1.63% at 24984.55. S&P 500 gained 1.86% and NASDAQ rose by 2.95%. In Asia, Nikkei fell by 0.40%. Singapore Strait Times lost 1.47%. China Shanghai SSE dropped by 0.55% and Hong Kong HSI was down 0.86%. Also, Japan 10 year JGB yield is down 0.004 at 0.111.

Yesterday, ECB President Mario Draghi could not convince traders that the Bank could continue to tighten monetary policy after next summer, as political and economic uncertainty in the Eurozone grows. The ECB confirmed on Thursday that its asset purchase program for 2.6 trillion euros ($2.97 trillion) will end this year and that interest rates may increase after next summer.

During Japanese Premier Shinzo Abe's first official visit to China, the two countries signed a broad range of agreements on strengthening bilateral ties. Overall, Japan and China are due to sign around 50 project memorandums of understanding during Japanese Prime Minister Shinzo Abe's visit to Beijing. Projects range from energy and healthcare to finance and automobiles. Cleveland Fed President Loretta Mester stated, that the Federal Reserve is still stimulating an economy that far exceeds its potential, so it must continue to raise interest rates even when it expects potential shocks. She also said that a financial incentive could ultimately increase US productivity, but this is unlikely to happen quickly.