FX: Dollar rises as investors seek a safe haven from Australian data
The dollar climbed to the highest level in more than three months against the euro after a government report showed Australia’s economy unexpectedly shrank last quarter, boosting demand for the U.S. currency as a refuge. The greenback climbed versus 10 of the 16 most-active currencies, pushing the Dollar Index to the strongest since April 2006. The Australian dollar fell to a one-month low against the U.S. currency.
“Australia’s GDP surprised markets as a minus figure so investors are clearly averse to taking on risk,” said Toshihiko Sakai, head of trading for foreign exchange and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s biggest bank. “The dollar is being bought as a safe-haven currency.” The AUD/USD is currently trading 0.6385 as of 8:40am, GMT.
The yen fell to the lowest versus the dollar in more than three months after a senior aide to Japan’s opposition leader was arrested in a funding probe, signaling political turmoil in the nation may worsen. “There is still instability in Japanese politics,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG. “This may increase foreign investors’ negative perception of Japan. The yen is likely to be sold” to 98.70 against the dollar and 124 per euro today, he said. Japan’s currency had its worst month in February since 1995 after a government report showed the economy shrank the most since 1974 last quarter and Finance Minister Shoichi Nakagawa quit amid accusations he was drunk at a press conference, eroding confidence in the government. The USD/JPY is currently trading at 99.25 as of 9:00am, GMT.
Sterling trimmed early gains against the dollar on Tuesday as UK share prices turned negative, hurting sentiment. The pound had fallen to its lowest level in just over a month against the dollar on Monday after share prices fell as HSBC unveiled a 12.5 billion pound rights issue as annual profits fell and bad loans soared in the United States. Britain's top share index .FTSE was down 1.2 percent by late morning trade after rising 1.2 percent in early trade. "There's just no confidence in how we're going to sort this all out," said a London-based trader, on the global economic downturn which is stoking risk aversion."And when things turn for the worse, sterling is going to get most hit." The GBP/USD is currently trading at $1.4045 as of 9:05am, GMT.
