The 'Big Three' Automakers Fail To Convince - Rescue Package Is A No Go, For Now

Daily Forex Fundamentals | Written by AC-Markets | Dec 12 08 08:09 GMT |

Market Brief The Yen rose to new highs against the majors this morning as traders flee the dollar. The Japanese currency reached new heights, momentarily touching 88.20 just as the U.S Senate announced its decision not to approve the $14Bn rescue package for the ailing U.S automakers. While the Yen traded steadily lower, EURUSD traded a very volatile 100pip range between 1.3300 and 1.3400. The unusual moves saw the Yen and Swiss currency rise as their safe haven status became all the more important. The decoupling between the equity markets and currency markets is all the more apparent as the dollar only momentarily slumps on the news, showing substantial resistance on the back of fund repatriation. The Nikkei 225 fell 5% this morning, the Hang Seng declined 6%, while Shanghai fared slightly better managing to fall by 2%. Honda and Nissan Motor companies fall by 12% as their U.S index futures sink. The widespread implications of a 'no deal' regarding the U.S Automakers sends the sector's stocks around the world tumbling. A default on the part of either Chrysler or GM would exacerbate the already dire job market in the U.S and could cause the whole industry to collapse. The Japanese MoF (Ministry of Finance) has always said that if USDJPY fell below the $90 level it would have to intervene. The strong Yen is penalizing an already difficult situation - an economy predominantly hinged on exports. When analyzing the events of this past night one must remember that when the U.S Government decided on the bailout for the Wall Street financials the Senate rejected the first attempt. Continuing disaccord on wages and insufficient guarantees of a radical revamp of the industry have kept the deal from going through. This said, having the Iconic Chrysler and GM fail in the last moments of the Bush administration would be yet another blemish in this administration's already tainted legacy. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.