ASIA SESSION: Risk Sags on Potential Trade War....

The Euro was still suffering in Asia from the fallout of Slovakia rejecting the expansion of the EFSF earlier in New York, but the day belonged to China. The passage through the US Senate of the so called China Currency Bill, which labels the Chinese as currency manipulators set forth events that helped move the currency markets. After the passage of the Bill, the USD/CNY was bought as traders looked to bail out of the Chinese Yuan, prompting the Peoples Bank of China to buy their own currency through a US bank to help stabilize the market. The PBOC was also seen boosting Chinese banking stocks that were sold in fear of a trade war with the US. Comments from the PBOC showed the disappointment in the passage of the bill and labeled it a threat to the stabilization of the global economy. With comments flying from both parties involved, risk took the cue to sell off…

With the EUR/USD already limping due to Slovakia voting down the expansion of the EFSF, 1.3580 was quickly visited on the downside for a loss of 75 pips. The hardest hit pair was the AUD/USD, which dropped from 0.9965 to lows near 0.9860 in the risk adverse environment. Better than expected home loans data, (1.2% vs. 1.1% expected) did not stop the slide lower. As well, news that Slovakia will likely pass the EFSF expansion in a revote later in the week did not quell jitters in Asia. Most pairs followed the predictable moves, with GBP/USD dropping from 1.5590 to 1.5540 and the NZD/USD falling from 0.7810 to 0.7740 on the day. Yen crosses all moved lower while the USD/JPY pair slept between 76.60 and 76.75, but a late day reversal saw most yen crosses grasping back to unchanged levels.

Lawmakers in the US were certainly busy today with the passage of the Chinese Currency Bill as well as the rejection of the much touted and than much maligned Obama Jobs Bill by the Senate. The news out of the US will c9ontinue later in the day as the FOMC releases last months minutes preceded by speeches by Fed members Plosser and Fisher. Following the FOMC minutes, ECB President Trichet will have some comments in a late day speaking engagement.