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By XE Market Analysis October 3, 2013 2:31 pm
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    XE Market Analysis: Asia - Oct 03, 2013

    The dollar sagged in N.Y. trade on Thursday, as anxiety over the U.S. government shutdown appears to grow by the day. Equities were crushed through the morning session, though recovered some when reports that Speaker Boehner is willing to pass a clear CR in order to move toward getting a boost to the debt limit which in turn would avoid a default. The dollar fell through the morning session, keeping pace with diving equities, and lower Treasury yields. EUR-USD approached 1.3650, levels last seen on February 4, and within striking distance of 2013 highs of 1.3710. USD-JPY meanwhile, traded the 96 handle for the first time since August, basing at 96.96. Obama's televised mid-day speech, aimed at goading Republicans to action, did helped calm markets, and perhaps did more to stir up anxieties ahead of the Boehner news. The greenback recovered some later in the day, though its fate will lie in Washington politician's hands.

    [EUR, USD]
    EUR-USD struggled near 1.3600 early on due to outstanding option expiries at 1.3590, 1.3600 and 1.3615 that rolled off at 10:00 EDT. For the second session a Middle Eastern name was noted on top and this limited gains to 1.3615 in Europe after large offers capped over 1.3620 in Asia. Immediately after the options cut, the pairing shot up to 1.3627, and found support from 1.3600 after that. Plummeting equities and lower yields eventually took the euro toward 1.3650, though news that the GOP may table a "clean" CR prompted some dollar short covering.

    [USD, JPY]
    USD-JPY opened at 97.75, and steady eroded through the morning session, trading the 96 handle for the first time since August, and basing at 96.96. The yield sensitive pairing eased on lower Treasury yields, and a general shunning of the dollar. Rumored semi-official Japanese bides under the 97.00 level however, stemmed the bleeding, and allowed a recovery over 98.25 in afternoon trade.

    [GBP, USD]
    Cable was drawn to 1.6200 for the fourth consecutive session as option expiries exerted an influence. Cable made another attempt to force a topside break, where very good offers resurfaced and led to a modest correction. Cable movement was guided to a degree by the slight pick up in the USD as the N.Y. session got underway, with events in D.C. in headlines. We expect U.S. accounts to remain non-committal and this should see more narrow price chop either side of 1.6200. Stale longs are unlikely to bail unless there is a breach of 1.6150, which held on Wednesday. EUR-GBP is looking more robust on underlying EUR strength. The cross rallied to 0.8440 from 0.8380 in n.Y. trade.

    [USD, CHF]
    CHF gains were absorbed by central bank speculation in early trade. Talk emerged out of London that the USD-CHF downside was limited by demand related to SNB activity. USD-CHF had not traded under 0.8990 since late February 2012 and the SNB could be concerned that if USD-CHF breaks lower than it may destabilise EUR-CHF. The dollar pairing did touch 0.8967, though quickly rebounded back to 0.9000. The cross resurfaced above 1.2250 after it moved into trend lows near 1.2215 on Tuesday, where very good Swiss and German demand emerged ahead of option barriers at 1.2200. Support on the downside and subsequent stability in USD-CHF has seen the daily chart point to higher levels in the cross and could deter heavier demand for the CHF.

    [USD, CAD]
    USD-CAD bumped into a layer of offers at 1.0340 several times, with the market apparently giving up on further gains. The pairing eased back to lows near 1.0320, though activity overall was muted. A layer of bids was noted at 1.0320-00, so narrow ranges may continue. USD-CAD touched 1.0317 lows before turning sideways.

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