Currency, gold markets subdued in Asia

Currency trading volumes were low as dealers awaited further news

By CNN's Grant Holloway

SYDNEY, Australia (CNN) -- Currency and gold markets were subdued in Asian trading Wednesday in the wake of the terrorist attacks in the United States.

Volumes of trade were low with dealers reluctant to take positions with the U.S. markets closed and uncertainty over which direction the U.S. dollar will take in the days ahead.

The price of gold, which initially spiked up as high as $290 an ounce immediately after the attacks, fell back to $286.75 in Asia.

In late afternoon trading, the US dollar was 37 points lower against the Japanese yen, buying Y118.79.

But the greenback was marginally firmer against the Euro at $1.094 and against the Australian at $1.923.

"Currency markets have been relatively mature about this," general manager Westpac economics Bill Evans told CNN.

He said the bigger movements in gold and currencies had been in Europe as a knee-jerk reaction but markets in this part of the world had reacted more calmly.

HSBC economist John Edwards said currency values seemed to be returning to where they were before the attacks but trading over the next few days would be affected by the extent to which U.S. markets could physically function.

"Broadly speaking, we should see markets settle down, but it could take a few days for them to stablilize," he said.

In Singapore, activity was subdued with most transactions carried out via electronic broking systems.

"There is not much going on. We helped some of our corporate clients square their positions. The costs are rather high because the spreads are wide ... that's what happens when there is no liquidity in the market," a dealer at a European bank told Reuters.

"Besides concerns over settlements, people are also waiting to see how global policy makers would react to the events. The dust has not settled yet," he said.

Long term impact

Australian dealers said they did not have any difficulties executing trades but volumes had been very low.

Edwards said he doubted there would be much long term economic impact from the attacks.

Evans agreed, saying, unlike during the Russian economic crisis, these attacks did not have the financial markets as their specific focus.

A major collapse in U.S. consumer confidence as a result of these actions could however have a recessionary impact in this region but it would be some time before that effect could be assessed.

"I don't think this is going to pose any threat to the financial system," he said.