Previous session overview

The yen got a lift in Asian trading Tuesday, with risk-averse investors seeking the safe-haven U.S. unit as Asian equities sold off against a backdrop of rising tension on the Korean peninsula.

The dollar went down to JPY90.05 as of 0450 GMT from JPY90.40 late in New York. The Australian dollar and the U.K. pound also declined to JPY73.81 and JPY129.23 respectively, while the Nikkei Stock Average earlier in the day slid below 9,500, its lowest level since Dec. 1.

The euro kept falling against the dollar and yen as concerns grow that the euro-zone's sovereign debt turmoil has started to undermine the health of the region's financial system.

As of 0450 GMT, the euro dropped to USD1.2303 and JPY110.78 from USD1.2383 and JPY111.92 in late New York Monday.

Elsewhere, the greenback soared against several key Asian currencies Tuesday, hitting multi-month highs and prompting suspected intervention in foreign exchange markets by central banks in the Philippines, South Korea and Indonesia, looking to slow the dollar gains a stark contrast with interventions in recent weeks that sought to prop up the dollar against high-flying units.

The Pound was well supported on dips from GBPJPY buying and EURGBP selling to push GBPUSD up above USD1.4500 briefly in Europe before falling on the slide in the Euro.

The Australian dollar slid in Asia trade Tuesday as a South Korea-led slide for Asian equity markets weighed on the currency.

Market expectation

As the EURUSD sinks again, analysts say that a re-test of the USD1.2100 lows are concrete, especially if the pair doesn't regain USD1.2450 very quickly. The pair is now at USD1.2284.

EURCHF began the week under selling pressure on ongoing concerns about the euro-region debt crisis, though no central bank activity has been seen, traders say. The debt issue and the rescue of a Spanish savings bank over the weekend is weighing on the euro, and traders expect that negative trend will persist this week. Support for EURCHF is likely at around 1.42.

AUD appears ever more vulnerable to momentum sellers and is likely settling into a new, lower range somewhere between 0.7700 and 0.8500. Two main issues are Europe's debt crisis, but also creeping views Asia may be in for some period of slower growth, something which will undoubtedly rub the lustre off AUD. What's more, dealers are now betting on 15% chance of RBA rate cut next month, compared with recent views rates would push into restrictive territory.

Sterling is likely to trade lower but in ranges. It is undermined by capital flight to the safe-haven U.S. dollar on heightened risk aversion. But GBP sentiment is soothed after the new U.K. Chancellor George Osborne unveiled GBP6.25 billion of spending cuts to reduce the U.K.'s GBP156 billion budget deficit, analysts said.

European stock markets are expected to open sharply lower Tuesday, hit by Wall Street's weakness on Monday, concerns about the banking industry following the weekend rescue of Spanish regional savings bank CajaSur and worries about the growing tensions between North and South Korea.

Disclaimer: the data made available by Dukascopy (Suisse) SAis for informational purposes only. Publication of this data by Dukascopy (Suisse) SA does not constitute provision of investment advice and Dukascopy (Suisse) SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.

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