Yen Gains on Safe-Haven Demand; Dollar Also Rises
The Japanese yen, a safe haven in uncertain times, firmed against the dollar on Tuesday amid further political uncertainty in Europe over Italy’s spending plans. The U.S. dollar index also rose.
The USD/JPY pair last traded at 112.57 by 1:00 AM ET (05:00 GMT), down 0.2%.
Reuters reported over the weekend that the Italian government expected the European Commission to decide for the first time to ask a member state to revise its draft budget later this week.
“Italy’s 2.3 trillion euro ($2.65 trillion) public debt, one of the world’s largest, makes the country vulnerable and a potential source of contagion for other euro zone countries,” Reuters reported citing three unnamed sources.
“Tensions are likely to heighten between Rome and Brussels, especially if the European Council launch an ‘Excessive Deficit Procedure’ against Italy,” said Philip Wee, currency strategist at DBS in a note.
“This would require Italy to provide a plan of corrective action to rein in its large public debt, currently at 130 percent of GDP vs the 60 percent Maastricht rule,” added Wee.
AUD/NZD: Trading below fair value – Westpac
According to Sean Callow, Research Analyst at Westpac, spot AUD/NZD has gyrated either side of their short term fair value estimate for the past year or so, recently slipping below fair value.
“Fair value estimates are always a simplification of a currency pair’s fundamental drivers, so deviations from the spot rate can persist for some time.”
“The spot rally to above 1.12 in Oct 2017 produced the largest overvaluation since mid-2015. This looked to be driven by jitters over NZ politics, concerns which seem to have faded in FX markets at least.”
“Instead, AUD may now have a degree of political risk premium, as it has underperformed G10 currencies since the leadership change in August despite higher commodity prices and strong GDP data. A federal election is due by May 2019, before which AUD could struggle to shake off any risk premium.”
“The current AUD/NZD undervaluation indicated by this short term model at time of writing is about 3 cents (1.11 versus spot 1.08), not very stretched by historical standards.”
Stock Market News
Asian shares buckle to European woes, Saudi anxieties
Asian shares fell on Tuesday as earnings season nerves in the U.S. dented Wall Street, while a cocktail of negative drivers from Saudi Arabia’s diplomatic isolation to concerns over Italy’s budget and Brexit talks depressed sentiment.
Selling in the region erased gains made in the previous two sessions’ rally, which were led by China stimulus hopes, with the MSCI’s broadest index of Asia-Pacific shares outside Japan dropping 1.3 percent.
South Korea’s Kospi fell as much as 2.5 percent and was on course to hit a 1-1/2-year low. In Japan, the Nikkei fell 2.3 percent.
U.S. stock futures dropped 0.8 percent in early Tuesday trade. On Monday the S&P 500 lost 0.43 percent as investors kept a wary eye on earnings amid global growth worries. Enthusiasm over some of the upbeat results was also tempered by the growing political uncertainty around the world.
“In short, the world seems to be getting into chaos,” said Akira Takei, bond fund manager at Asset Management One.
Dow futures drop over 200 points ahead of earnings deluge, as China stocks fall
Stock futures pointed to a losing session on Tuesday, as appetite for riskier assets such as equities took a knock as a two-day rally for China’s stock market began to unravel. Investors were also braced for a heavy deluge of earnings from major companies such as Caterpillar Inc.
How are major indexes trading?
Dow Jones Industrial Average futures YMZ8, -1.09% fell 193 points, or 0.8%, to 25,099, while S&P 500 futures ESZ8, -1.21% fell 23.25 points, or 0.8%, to 2,733. Nasdaq-100 futures NQZ8, -1.44% slid 68 points, or 0.9%, to 7,088.
DJIA, -0.50% On Monday, Dow industrials DJIA, -0.50% dropped 126.93 points, or 0.5%, to end at 25,317.41, while the S&P 500 SPX, -0.43% shed 0.4%, to close at 2,755.88. The Nasdaq Composite Index COMP, +0.26% managed a 0.3% gain, to finish at 7,468.63.
Police Filings Mount as Crypto Investors Demand Funds from WEX Exchange
Users of the long-troubled cryptocurrency exchange WEX have begun filing police reports after more than three months of being unable to withdraw major cryptocurrencies or fiat, CoinDesk has learned.
A WEX trader named Ruslan, who has been encouraging other users to seek an official investigation, told CoinDesk that as many as 35 such reports have been filed thus far online through the website of the Russian Interior Ministry. At least seven such reports have been filed since October, based on confirmation numbers reviewed by CoinDesk and checked against the Interior Ministry’s website.
The fact that users of a cryptocurrency exchange that has operated at the fringes of the market would seek help from the government is itself notable. WEX was built on the ashes of BTC-e, the mysterious, long-running exchange that ultimately collapsed after U.S. officials seized its domain and then slapped BTC-e and its suspected operator with a massive $110 million fine.
But this summer, the initial enthusiasm around what was effectively a rebirth of BTC-e gave way to growing complaints around withdrawals, which manifested in sky-high prices well beyond those reported on more well-known exchanges. Those issues continue to this day, with the price of USDT – a controversial stablecoin that lost its parity with the U.S. dollar last week – trading for a whopping $6.99 on WEX.
As such, WEX traders – after months of demanding answers (WEX’s last public message on Twitter was posted in late August) – are taking matters into their own hands, seeking an investigation in an effort to get their money back. What’s more, recent developments continue to further stoke questions over who is actually running WEX and, by association, who is safeguarding user funds.
Ruslan told CoinDesk that he hoped to make law enforcement take measures against WEX’s CEO Dmitri Vasiliev and “his conspirators” to prevent them from initiating any new projects in crypto.
“The main idea has been to show other users that they are not alone, that we can act together and fight for our rights by legal means,” he said.
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