Growing global fears over potentially stagnating in China’s and the U.S’s economic recovery as well as mounting concerns over the overall health of the Euro Zone’s banking system have pushed investors to seek refuge in safe haven currencies- mainly the Yen. The Japanese currency approached a seven month high against the greenback as forex traders flocked to the currency amid concerns that the dwindling global economic recovery will discourage central banks from withdrawing their stimulus measures. The Dollar stabilized yesterday after falling last week on a disappointing job report; however, it still has not regained its appeal as the most favored safe haven currency. Distress over the state of the U.S. economy resurfaced after Friday’s job report showed weak hiring in the private sector, fueling concerns that the world’s largest economy could be headed for a double dip recession.
The Euro dropped to $1.2482 in this morning’s session, but managed pull back up above $1.2557 and is continuing towards last week’s six week high of $1.2613. With no major Euro impact news today, the main focus remains on yesterday’s comments made by European officials regarding the stress tests to be conducted on Euro zone banks. Investors are looking for proof that these tests will be conducted objectively, and that credible back-stops are put forth by policy makers in case of a fall-out. Although the EUR/USD seems to have found solid support above the 1.25 level, failure to address these rising concerns could have a negative impact on the Euro.
The Aussie successfully erased all initial declines following the Australian Reserve Bank’s announcement to hold interest rates unchanged. This morning, as predicted, RBA Governor Glenn Stevens opted to hold the overnight cash rate at 4.5% for a second month in a row. With its decision to hold the interest rate unchanged, the RBA has joined central banks in the U.S., Europe and parts of Asia in keeping key interest rates unchanged to better gauge the affects of the European sovereign debt crisis on the global economic recovery. The AUD/USD touched on 0.8391, up from 0.8370 at the time of the RBA decision.
Written by Finexo.com