Currency markets are back to acting a lot more like 2009 than 2011, with the dollar and the yen serving as safe-havens on Monday. All the faddish safe-havens of the past few months, well, they are out of fashion. The Aussie, Singapore and Canadian dollars might have AAA ratings, but they are sure acting like crummy alternatives today.
Aussie is down 1.2% at $1.03. The greenback is up 0.5% against the Singapore dollar, and as Citi’s Patrick Perret-Green noted to clients today, is off 2% since Wednesday. He calls the Singapore dollar a “lazy long” (trader speak for a bet you didn’t work hard on, so is probably a dog) and “relative to market size, one of the most crowded positions in Asia.” (Too many people on the same boat that has now sprung a leak.)
Meantime the U.S. dollar hit parity with the Canadian dollar Monday Asia time before sliding just below the level that is of important bragging rights among North Americans. A greenback was lately trading for 0.999 loonies.
The yen meanwhile surged nearly 1% to 76.80 and hit a 10-year high against the euro. It’s renewing talk of government intervention, though analysts at Barclays noted this morning it will be tough for Japan to fight the trend if the euro selloff gets particularly ugly. Plus, the Europeans have been more vocally against yen intervention in the past.
Which gets to why this is all happening: European ugliness. The euro has held its own the past few months but that ended Friday with the resignation of Germany’s ECB rep Jurgen Stark, sparking a new level of worry about the common currency. The euro fell below the symbolic $1.39 level, which seemed to trigger a sell-off in other currencies that benefit when markets are happy. Markets aren’t happy anymore.
