U.S. Dollar Rallies Against All Majors on Risk Aversion Wave

The greenback, as the dollar is often referred to, climbed versus virtually all of the 16 most traded currencies, as unfavorable economic reports worldwide brought risk aversion up among traders this week, favoring the low-yielding safety profile of the North American currency.
Since last week’s employment report in the U.S. showing worse than expected numbers, risk aversion has returned to markets, and this week, multiple news coming from North America, as a report showing a fall in consumer confidence, and globally, as pessimist speculations for several European Union nations, pushed equities markets down globally, reflecting in currency markets movements. The Swiss Franc lost against the dollar as central bank’s President Jean-Pierre Roth said policy makers will continue to buy foreign currencies to stop the national currency rally. The Ruble lost against the dollar after Bank Rossii cut its benchmark interest rates and the crude oil, the main Russian export, fell below $60 a barrel in New york.

Analysts believe that the U.S. dollar may continue bullish as it is hard to expect that extremely optimistic news will revert the current pessimistic trends in currency and equities markets. The dollar’s position as the main world currency may be discussed in the upcoming weeks, which is the only foreseeable factor that can bring the greenback down for the short-term future.

USD/CHF ended the week at 1.0858 climbing from a previous rate of 1.0777. USD/RUB traded at 32.7380 from 31.8580.

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Pound Declines on Weakening British Financial System

The British pound started this week losing against currencies like the euro and the dollar as speculations that British banks may announce further losses rose, suggesting that the worst moments of the recession are still to come.
The Sunday Times, one of the most prestigious U.K. newspapers affirmed yesterday that Lloyds Banking Group Plc, one of the giants of the British financial sector, would be in a difficult situation and that it may post further losses, reflecting this Monday on British stocks and the national currency, which is being traded at the lowest level in two months against the euro. Concerns regarding a longer than expected crisis in the U.K. made the FTSE 350 Banks Index to drop 1.5 percent, as U.K. Gilts rose, attracting British investors to the safety of fixed income earnings.

The banking sector in the U.K. has not been posting any alarming news for the past weeks, but this Sunday Times article rose risk aversion among traders that are already concerned with the international economic scenario. The pound may post further declines against the euro, if risk appetite, which was supporting the British currency, fail to reappear. Currencies like the yen and the greenback still have a bullish perspective versus the pound, as the growing risk aversion attracts traders to safer assets.

EUR/GBP traded at 0.8686 as of 10:36 GMT rising from an opening price of 0.8599. GBP/USD fell to 1.6044 from 1.6195.

New Zealand Dollar Weakens on Faltering Confidence

The New Zealand dollar is heading to the lowest rate in eight weeks against the yen and losing against the greenback, as global risk aversion is damping demand for the kiwi’s high-yield profile.
The New Zealand dollar started another week with a negative performance as pessimism is still spreading in equities markets locally and world wide, damping demand for the kiwi, which often experiences falls as risk aversion grows among traders. A report in New Zealand added for the pessimism towards the kiwi, as farmers confidence fell for the third time since November, since dairy prices are constantly slumping in the country, slashing profits in the agriculture sector. The Australian dollar followed its regional counterpart and also declined substantially, being the worst performer against the greenback, on speculations that U.S. corporate profits will fall, adding to the growing attractiveness of safer positions with the U.S. dollar and the yen.

The economic situation in New Zealand, as in its neighbor Australia does not offer attractiveness enough for traders to purchase kiwi priced assets, as risk aversion is driving them away to other overseas options. Even if the economic contraction in the region is far less considerable as it is in other continents, the volatility of the New Zealand dollar is being an option for traders to profit, currently selling it to purchase yen priced assets.

NZD/JPY declined to 57.43 as of 11:51 GMT from an opening price of 57.98. NZD/USD followed, from 0.6277 to 0.6222.

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Yen Leads Weekly Gains on Safety Demand

he yen is this week’s best bet among traders, as speculations that a weak U.S. corporate earnings to be posted this week made Japanese investors to sell overseas assets and repatriate their capital to the Asian nation.

After negative news last week that brought risk aversion up in world markets, this Tuesday events provided support for the yen to gain even further, as pessimist statements in the U.K., regarding the countries financial sector health, and speculations that U.S. corporate earnings will be weaker than previously expected spurred attractiveness for the yen’s safety profile, making Japanese investors to repatriate their capital an bringing traders that were opting to higher-yielding assets to purchase yen priced ones, in order to protect their options from bearish market days.

GBP/JPY fell to 152.85 as of 20:47 GMT from a previous rate of 155.25.

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Dollar Climbs as Safety Demand Rises on Markets

The dollar ended this week posting gains versus all 6 major currencies, as another wave of pessimism caused by grim reports in U.S. and U.K. spurred demand for the safety of the greenback.

Commodity linked currencies like the Australian dollar, and emergent-markets currencies like the South Korean won posted significant losses against the greenback, after a report in U.S. indicated more-than-expect job cuts, inflating risk aversion among traders, who immediately sold high-yielding assets to purchase assets priced in dollar, which are more reliable in times of uncertainty. Even the yen, which is often associated as a refuge currency during times of crisis failed to end the week positively against the U.S. dollar, as speculations in Japan this week suggested that the country may invest 10 percent of its public pension-reserve funds in high-yielding assets, damping demand for the safety of the yen.

Currency strategists affirm that this kind of reaction in markets was expected in case the employment figures in U.S. failed to rebound, fears that the global slump might be prolonged for an undetermined amount of time were already significant, and negative data like this week’s U.S. report indicating further job cuts rose risk aversion to high levels among traders, which were investing massively in high-yielding currencies, betting in a quick global economic recovery.

USD/KRW ended the week at 1265.90 from a opening weekly price of 1233.04. USD/JPY followed the same trend ending the week at 96.02 from 95.35. AUD/USD fell to 0.7967 from 0.8015.

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Australian Dollar Hits Two-Week Low on Jobs Data Speculations

The Australian dollar, one of the main high-yielding currencies among the 16 most traded, has been witnessed a sharp decline since last week’s new wave of pessimism struck equities and commodities markets.

Since last week the Aussie entered a significant downtrend mainly against the yen and the greenback after a U.S. employment report indicated more-than-expected job cuts in the North American nation, suggesting that the global slump will still be the main world financial scenario for an undetermined period of time. The Australian dollar is down for almost a week as stock markets have been bearish for almost a week, and tomorrow, an Australian jobs report is likely to show that the unemployment reached the highest level in six years, adding to the already negative outlook for the Australian currency. The Aussie high-yielding profile lost attractiveness as investors look for safety purchasing assets mostly priced in U.S. dollar or in yen.

Economists affirm that a combination of two individual factors weigh negatively on the Aussie’s outlook, the new wave of optimism, and tomorrow’s jobs report, which is likely to come negative. The Australian dollar has climbed significantly as the global economy showed signs of recovery, but as the global slump insists to affect markets, we will be likely to see a weakening Aussie for the next weeks.

AUD/USD fell to 0.7849 as of 8:53 GMT from a previous price of 0.7955. AUD/JPY traded at 73.92 from 75.77.

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Ruble Drops as Crude Oil Rates Continue Decline

Russia, the world’s leading energy supplier and main oil exporter to Europe, has witnessed a considerable drop in its currency as the crude oil price is reaching almost a week of declines, as concerns regarding the global slump may slash global energy demand for the next months.

The Russian Ruble has been affected directly by the latest fall in the crude oil rates, which after rallying as the global economy showed several signs of recovery, faced yesterday the longest streak since December, losing more than 1 percent and reaching a rate of $61.99 a barrel in New York, the lowest price in two months, weighing negatively on the ruble, which is extremely linked to commodity prices due to the vast natural resources availability in the Russian country. Bank Rossii regulates the price of the ruble in a band to prevent exporters to lose competitiveness in global markets, and after last week’s speculations that measures would be taken to prevent ruble gains, oddly enough, the ruble went down due to international pessimism and risk aversion rise.

Analysts suggest that the new wave of pessimism, if continued, will affected not only the ruble but also Russian stock markets, which are mainly moved by the national energy companies. If the recession will be prolonged in Europe, the demand for oil will falter, affecting the Russian currency and economy in multiple sectors.

USD/RUB climbed to 31.8007 as of 9:41 GMT from 31.552 in the intraday comparison, being the fourth session in a row of gains for the greenback versus the ruble.

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