Forex consolidation continues

Forex: Consolidation continues in currency markets, with short-term traders continuing to book some profits on the recent greenback rebound. Traders say the market still views any EUR rebound as a selling opportunity, given the view that the trend here is for a stronger USD. Traders will continue to wonder to what extent profit-taking on long USD positions occurs. Renewed risk aversion supported the JPY, with EUR/JPY falling to the lowest level since May 16. For USD/KRW, traders talked of possible intervention by the Korean government to defend 1,050.

The Bank of Japan board voted unanimously for the tenth consecutive meeting to leave interest rates unchanged, as widely expected. The bank sees downside risks in domestic demand and the global economy, with members saying that they will keep an eye on inflationary expectations and corporate price-setting behavior. The central bank said in a statement that economic growth had been sluggish due to weaker growth in exports and high energy and raw material prices, downgrading its economic assessment.

The minutes of the Reserve Bank of Australia's August meeting reaffirmed the bank's easing bias, with members saying that less restrictive policy may soon be needed to guard against a deep slowdown. The bank projected that Q2 GDP growth will be slow, with more weakness expected during Q3. The minutes pointed out that Aussie retailers' July sales were not as weak as June, but noted that the disruption in global credit markets intensified recently.

New Zealand's producer price inflation accelerates in Q2: (NZ Q2 PRODUCER PRICES INPUTS QOQ: 5.6% V 2.3% prior; OUTPUTS: 3.5% V 1.8% prior) Analysts said the numbers seem to be driven by high energy prices, a falling NZD and high commodity prices. They added that the data will add weight to the argument that inflation will prevent a very aggressive easing cycle.

Equities: At 0:01 EDT Japan's Nikkei is -2.48%, the S&P/ASX200 is -1.37%, South Korea's KOSPI is -1.81%, Hong Kong's Hang Seng index is -0.63%, and the Shanghai composite index is 0.18%. The S&P500 futures contract looked heavy throughout the Asian session, currently trading at 1,282.50. Wall Street's renewed focus on credit trouble spilled over into Asia, with financials leading much of the downside in Tokyo. The Nikkei dipped below 13,000, with a rising JPY hurting exporter valuations. Short-term traders booked profits on BHP's recent surge, with the benchmark S&P/ASX200 index finding some support around 4,900. Mobile phone operators, steel companies and chip makers dragged down South Korea's KOSPI, while banks and property developers weighed on Hong Kong's Hang Seng index. Chinese stocks had another volatile session after an early wave of selling, with the Shanghai composite rebounding from 2,300, a rumored intervention level.

Commodities: Nymex crude oil prices traded lower by -0.87% between 18:00 EDT and 0:03 EDT, last trading at $111.89/bbl. Venezuela's Oil Minister said that they will support an OPEC production cut at the September meeting. Spot gold is lower by -1.41%, last trading at $794.40/oz.