Asia Session – September 20, 2011 1:45 AM

Today’s FX action in Asia was initiated right near the day’s open when the S&P ratings agency announced that it had downgraded the debt rating of Italy and subsequently put them on negative watch. This move pretty much took the markets by surprise as while a downgrade of Italy was deemed imminent by Moody’s, the S&P move was slightly off the radar. Now that the 90 day review period of Italian debt as passed last Friday, a Moody’s downgrade is expected within the month. The EUR/USD, just off of New York highs of 1.3720, took the announcement hard, dropping from 1.3680 to 1.3615 in a swoop. While the pair did stabilize over the course of the session, the Euro saw subsequent lows near 1.3595 late in the day against the dollar. The downgrade immediately set the tone of Asia as risk adverse, and the moves that followed favored the yen and the dollar. Full text »

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