Thin conditions form backdrop to FX flight to quality

First Published Friday, 27 November 2009 from Need to Know News

European morning flows were exacerbated by thin, illiquid trading conditions. Early action favoured a flight to quality bid, which buoyed the dollar and weighed heavily on EUR, GBP and the commodity bloc currencies. However, Asian sovereign accounts were bargain hunting via EUR-USD ahead of 1.4800 and in Cable under 1.6300, which put a floor place, as did tentative support across European indices, which steadied after their early losses. Japanese intervention risk saw a decent short covering rally via USD-JPY, which extended to 86.82 versus 14-year lows of 84.83 seen in Asia. This took out a number of short term players via the dollar pairing and the JPY crosses and forced many to the sidelines ahead of an abbreviated U.S. session.

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