Dollar And Yen Higher On Risk Aversion

Disappointing earnings reports from Apple (AAPL) and China Unicom (CHU) sent Asian stocks sharply lower today and risk aversion lifted dollar and yen. Improvement in deflation reading also helped provide some support to the Japanese yen for recovery. The yen would likely be torn between expectation of BoJ easing next week and a bit of risk aversion and must go nowhere today. Meanwhile, we'd possibly see other major currencies weaken against dollar mildly today before Q3 GDP data from US, which might rock the markets.

Released from Japan, national CPI dropped -0.1% yoy in September, staying in deflation while Tokyo CPI dropped -0.4% yoy. Though, both are better than expectation of -0.2% yoy and -0.5% yoy respectively. After all, as Japan remains in deflation, the expectation for BoJ to expand monetary stimulus next week in its October 30 meeting is higher. There are still much to be done to achieve the 1% inflation target. And if it happens, it will be the second time BoJ expand stimulus in two months.

In US, there were some rumors that Fitch is going to downgrade its rating on US debts. Fitch declined to comment but just referred enquiries to its July statement on US ratings. There it said that US' credit rating is unlikely to change before late 2013. The rating agency will need to wait to asses the deficit-reduction plans following this year's election. Meanwhile, July's statement also noted that US's AAA rating is underpinned by diversified and productive economy and financial flexibility from the dollar’s status as the reserve currency.

In Eurozone, Santander, Spain's biggest bank, urged the government to seek an international bailout. Chief executive Alfredo Saenz said that "a situation in which the Treasury funding is being helped by contingency credit lines offered by any international body will produce a fall in the sovereign debt risk premium and, as a consequence, a fall in banks' risk premium". Markets have so far been very quiet regarding Spain this week and we'd need to wait under November to have some developments.

On the data front, New Zealand trade deficit cam in narrower than expected at NZD -791m in September. German Gfk consumer sentiment for November improved to 6.3. Import price dropped -0.7% mom in September. Swiss KOC leading indicator will be released too. Meanwhile, US Q3 GDP will be the main feature today and is expected to show 1.8% annualized growth.