By CountingPips.com
The U.S. dollar and Japanese yen traded sharply higher in the forex markets and the U.S. stock markets registered steep declines as investor risk aversion was the dominate theme in trading today. The continuing fiscal problems in Greece as well as concern about the debt levels of Portugal and Spain weighed heavily on the euro today while the higher yielding 
currencies were affected by poor economic news.
The safe haven currencies (U.S. dollar and Japanese yen) were sent to higher levels versus the euro, British pound sterling, Australian dollar, New Zealand dollar, Canadian dollar and the Swiss franc in the forex markets. The U.S. dollar did fall sharply against the yen in head-to-head trading as the USD/JPY currency pair dropped under the 89.00 level to trade at its lowest level since December 14th.
The Japanese yen touched an 11-month high against the euro and the U.S. dollar reached over an 8-month high versus the European common currency.
The American currency made a multi-month high against the Canadian loonie as the USD/CAD pair reached the 1.0757 level for the first time since November 8th. The dollar also marked its highest point versus the Australian dollar since October 2nd at the 0.8607 level and climbed to its highest exchange rate versus the New Zealand dollar since September 4th at 0.6844.
The U.S. stock markets, meanwhile, ended the day with sharp declines as the Dow Jones industrial average fell by roughly 268 points and marked its largest declining day in 2010. The Nasdaq decreased by 65.48 points and the S&P 500 declined by 34.17 points. Oil fell lower by $3.95 to trade at $73.03 and gold plunged by $47.40 to the $1,064.00 per ounce level.
The U.S. weekly jobless claims release, coming one day ahead of Friday’s non-farm payrolls report, showed that new jobless claims increased last week by 8,000 workers a total of 480,000 unemployed workers. The 4-week moving average of unemployed workers also increased, gaining by 11,750 from the prior week to a total of 468,750. Friday’s market-moving job report should create further volatility in the markets and signal how well the U.S. economic 
recovery is progressing.
Out of Europe this morning, the Bank of England and the European Central Bank held their interest rates steady as widely expected at 0.50 percent and 1.00 percent, respectively. The Bank of England maintained their bond buying program at £200 billion but said that “further purchases would be made should the outlook warrant them.”
News out of the Asia-Pacific region this morning also helped to dampen risk appetite mood as Australian retail sales fell unexpectedly in December and New Zealand’s jobless rate jumped to a 10-year high in the 4th quarter of 2009. Australia’s retail sales declined by 0.7 percent after a 1.5 percent revised gain in November and surpassed market forecasts that were calling for a 0.2 percent rise. New Zealand’s unemployment rate reached 7.3 percent in the 4th quarter, its highest level since the second quarter 1999. New Zealand’s job totals declined by 0.1 percent in the quarter and by 2.4 percent on an annual basis.
EUR/JPY 1-Hour Chart -The Euro dropping like a stone today versus the Japanese Yen in forex trading. The EUR/JPY fell approximately 400 pips today to touch its lowest exchange rate since February 24th, 2009.
