In US trade, the euro slumped below the 1.22 level on diminishing hopes of any fresh policy initiatives amidst a clearly slowing global economy.
Risk aversion was reinforced by a number of factors including concerns about the outlook for Spain in the aftermath of the government's new austerity measures, the lingering uncertainty over Greece’s austerity programme that is well off track, unconvincing Chinese lending data ahead of today’s GDP release, the softer-than-expected Australian employment report, and the BoJ's unwillingness to expand the size of its Asset Purchase Programme.
Throw in the sluggishness of the US economy and the seeming lack of urgency from the Fed to provide any further assistance, and there is no shortage of reasons for both traders and investors to be shunning risk at the moment. Having ended yesterday’s Australian session around the 1.2235 level, the euro fell to a fresh two-year low of 1.2167 before recovering to close US trade at 1.2203. Upon resuming for Asian trade, the euro has drifted into the low-1.2190s.