Risk aversion pushes up dollar and yen
As Lehman Brothers filed for bankruptcy protection, US currency moved up as rising risk aversion. Yen too moved up broadly.
Analysts and experts believe that another factor that has been pushing dollar, after a sudden drop, is the fall in prices of crude oil. The crude oil prices have touched its seven month low at $100 per barrel.
Senior currency strategist at Bank of New York Mellon in New York, Michael Woolfolk, said that dollar is performing price action same as what it did before liquid crisis of last year’s August. He also added that now more and more people are looking at dollar as a refuge. Michael said that in the midst of market disturbance, which is happening right in financial markets of United States, and increasing uncertainty, US currency is pulling cash.
The largest causality of credit crisis across the globe, fling of bankruptcy by Lehman Brothers came after it financed large chancy assets with little funds and financial backup.
In the mean time, market was hit by news about the purchase of Merrill Lynch by Bank of America and the acceptance of stocks for cash loans by Federal Reserve.
ICE Futures index was recorded 0.6 percent up with 78.800, in the morning trade New York. Index, that assesses performance of greenback in opposition to other major currencies, was also noted at a high of 79.360.
Also considered as a safer option, Swiss franc was up in opposition to the dollar as it went down to 1.1203 francs with a 0.8 percent of fall. From it previous gains of $1.4479, euro went 0.2 percent down as it touched $1.4197. Japanese yen had its own jump, as dollar went down to 105.83 yen due to the increasing risk aversion, whereas euro was pushed 1.9 percent below as it was noted at 150.40 yen.
Foreign exchange strategist at ABN Amro Bank in Chicago, Dustin Reid, said that the whole situation is regarding risk aversion. He also included yen’s performance in the current state of market, which is going through increasing or rising risk aversion.
European market faced a jumping European credit spreads as the stocks went down by over 4 percent. High-yielding currencies like New Zealand and Australian dollar went down against Japanese yen and US currency.
The previous trade showed a sharp fall in US stocks. A number of central banks across the globe came forward to help control down the market, struggling with the rising uncertainty. These major banks included names like Bank of Japan, European Central Bank and Bank of England.
Speculations have been surrounding the market that on its Tuesday’s policy meeting, Federal Reserve may announce a cut in interest rates. There are 64 percent of chances of a rate fall in fed funds futures. Possibility is of a fall from 2.0 percent to 1.75 percent.