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FX traders flock to safety

It is risk-off in the FX space today as investors buckle up for the Crimea referendum.

Traders were clinging on to hope that perhaps Russia will give in on the Ukraine situation and this would have given risk some room to move higher. However, the bad news just seems to be continuing to mount for risk this week, with China data deteriorating significantly. Industrial production slowed significantly at just +8.5%, which was well below consensus of +9.5%. Retail sales and fixed asset investment data also missed estimates and analysts feel the combined impact of these readings points to a high likelihood of a big GDP drop for Q1.

Yen strength likely to continue heading into the weekend

With risk aversion in full swing, USD/JPY is the currency pair to watch at the moment. USD/JPY dropped from around 102.80 all the way down to 101.60. This sees the pair approaching March 3 lows which were printed when the situation initially kicked off. With Ukraine/Russia tension just not easing at all heading into the referendum, fears the situation will escalate are keeping investors risk-averse.

It’s a fairly busy day on Japan’s economic calendar today with the BoJ minutes from the February meeting and January industrial production figures due out. Given there were no major changes from the meeting, the minutes haven’t really brought any surprises. The highlight was that members feel the economy and prices are travelling in-line with their forecasts and that the sales tax hike will not derail the economic recovery.

Apart from Japan data, the rest of Asia is set for a relatively quiet session on the economic front. Later out of the US we have PPI, consumer sentiment and inflation expectations data due out. However I suspect markets will remain choppy heading into the referendum with safety first being the main theme. Already, gold has printed a new high in Asia as the yen also appreciates. 

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