Risk aversion is back in FX market

Risk aversion is back. After two attempts to climb higher on 24-25 Sep, AUD/ JPY fell to 83.80 yesterday, its lowest close since 7 Sep. Both AUD/USD and USD/ JPY closed below their psychological levels at 0.70 and 120 respectively. In overnight markets, the Dow Jones Industrial Average fell 1.92% or 313 points to 16001.89, while the broader S&P500 fell 2.57% and the Nasdaq 3.04%. Bond yields eased, with the 2Y down to 0.6683% vs 0.7062% a week ago, and the 10Y to 2.0949% vs 2.1623% last Friday. Close attention will be paid to commodities, one of the factors blamed for yesterday's sell-off.
 
The sharp fall in US tech stocks is likely to find its way into the Korean won and the Taiwan dollar. USD/KRW, which has been rising back towards 1200 after it bottomed at 1157.43 pm 17 Sep, may test and trade above the 1208.60 high seen on 8 Sep. USD/TWD has already traded above its 33.100 high seen on 25 Aug, and looks set to be supported above 33, especially after the rate cut last week. India is expected to cut rates today, and Singapore may ease its exchange rate policy next month. USD/SGD traded to 1.4302 this morning, above the previous 1.4294 high seen on 8 Sep. Within the SGD basket of currencies, much pressure is coming from its neighbors, Malaysia and Indonesia. USD/MYR, which has been rising from 4.2060 since 21 Sep, broke above 4.40 this morning. USD/ IDR rose to 14695 from 14450 for the comparable period.