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FX Market Awaiting White House Announcement

Wednesday, February 03, 2010 GMT

By: Hillel Fuld
The JPY rose off earlier lows against the majors and the AUD slid on Tuesday after Australia's central bank put the country's interest rates on hold, surprising investors who had been preparing for a rise in rates.

The Australian dollar decreased by approximately a full cent against the USD in a matter of minutes after the Reserve Bank of Australia (RBA) held its key cash rate steady at 3.75% on Tuesday, defying market expectations for a rate rise to 4.0 percent.

That move spilled over into other major currencies, with the EUR initially sliding against the USD and the JPY rising broadly.

The Japanese currency may have more room to increase depending on what White House adviser Paul Volcker has to say about a White House plan to curb financial risk-taking later on Tuesday, said Minoru Shioiri, chief manager of FX trading at Mitsubishi UFJ Securities.

Volcker will appear before the Senate Banking Committee on Tuesday to defend the administration's proposal, which frightened investors and triggered a sell-off in equities when it was first unveiled last month.

"If Volcker says anything specific about possible regulation, equities may react negatively and the dollar and the yen may both strengthen," Shioiri said.
The dollar and the yen are used as funding currencies in carry trades, which involve selling low-yielding currencies to invest in higher-yielding assets.

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<h1>FX Market Awaiting White House Announcement</h1> Wednesday, February 03, 2010 By: Hillel Fuld 
The JPY rose off earlier lows against the majors and the AUD slid on Tuesday after Australia&#39;s central bank put the country&#39;s interest rates on hold, surprising investors who had been preparing for a rise in rates. 
 
The Australian dollar decreased by approximately a full cent against the USD in a matter of minutes after the Reserve Bank of Australia (RBA) held its key cash rate steady at 3.75% on Tuesday, defying market expectations for a rate rise to 4.0 percent. 
 
That move spilled over into other major currencies, with the EUR initially sliding against the USD and the JPY rising broadly. 
 
The Japanese currency may have more room to increase depending on what White House adviser Paul Volcker has to say about a White House plan to curb financial risk-taking later on Tuesday, said Minoru Shioiri, chief manager of FX trading at Mitsubishi UFJ Securities. 
 
Volcker will appear before the Senate Banking Committee on Tuesday to defend the administration&#39;s proposal, which frightened investors and triggered a sell-off in equities when it was first unveiled last month. 
 
&quot;If Volcker says anything specific about possible regulation, equities may react negatively and the dollar and the yen may both strengthen,&quot; Shioiri said. 
The dollar and the yen are used as funding currencies in carry trades, which involve selling low-yielding currencies to invest in higher-yielding assets. 
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