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    Asian Session – Yen gains as global stock sell-off continues but oil rebounds

    Global stock markets saw sharp losses on Monday and Tuesday as fears about global growth hit investor confidence. US equities reversed earlier heavy losses with the S&P 500 closing 1.4% lower yesterday, having been down by almost 3% at one point. Banking stocks were particularly hit as growth concerns and a prolonged period of low interest rates weighed on the sector.

    Japanese shares were the worst hit with the Nikkei 225 index slumping by 5.4% at the close on a stronger yen.  The US dollar plunged to the lowest level against the yen since November 2014, hitting a low of 114.20 yen. Safe-haven flows have sent the Japanese currency soaring higher in the past day. But the dollar managed to recover to 115.30 yen in late Asian trading today.

    Comments by Japan’s Finance Minister Taso Aso did little to deter the yen’s rally. Aso, who described the yen’s gains as “rough”, said he’ll be keeping a close watch on foreign exchange movements.

    Gold rallied to an 8-month high yesterday, peaking at $1200.74 an ounce but had eased to around $1186 on Tuesday. Government bonds also benefited from the sell-off in risky assets. Ten-year Japanese government bond yields fell to below zero for the first time. However, Eurozone government bond yields had stabilized with the spread between periphery and German yields narrowing.

    This helped the euro reclaim the 1.12 handle against the dollar in early Asian session. But poor German data dragged the euro back down to 1.1173 dollars in late session.

    Industrial production in Germany fell by 1.4% in December month-on-month, falling short of expectations of a 0.4% gain. Trade figures were also worse-than-expected as exports dropped by 1.6% in December versus forecasts of a 0.5% rise.

    The Australian dollar fell sharply after the NAB business conditions index declined to 5 in January from 7 previously. The business confidence index also declined, falling to 2 from 3 in December. However, firmer commodity prices helped the aussie rebound from a low of 0.7018 versus the US dollar to around 0.7057 in late Asian trading. The kiwi also gained in late session, climbing to 0.6613 dollars.

    Oil prices bounced back strongly today following three straight days of losses. WTI crude futures were last up 2.6% at $30.45 a barrel.

    Coming up later today, UK trade figures and the JOLTS job openings for December will be the main data of the day.

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