Financial Sector Concerns Affect Risk Sentiment
The recent rise in risk appetite has been dampened by concerns about the banking sector and credit markets. Last week investors snapped up forex opportunities offered by high yielding currencies like the Australian and New Zealand dollars. The Japanese Yen and the US dollar rose on Tuesday as forex brokers took defensive positions as recent optimism faded.
Yen Gains on Safe Haven Buying
The Yen had hit a six month low against the Euro and the dollar but gained as renewed concerns about the health of the banking system emerged. News about the failure of IBM’s takeover bid for Sun Microsystems also sent investors to the safe haven and forex opportunities offered by the Yen and Dollar.
Euro Zone GDP Declines
Figures from the Euro Zone showed a 1.6% fall in GDP during the fourth quarter. A 0.9% decline in European stocks and a 1% fall in the Standard and Poor’s 500 stock futures also put pressure on the Euro and other higher risk currencies. The decline in equities prompted forex brokers to seek dollar denominated assets which are seen as safe havens in down markets. The Yen which is also seen as a safe bet rose providing investors with forex investment opportunity.
IMF Warns of $4 Trillion Toxic Debt
A report by the Times that stated that the IMF will warn that toxic debt by banks and insurers could total over $4 trillion dollars had investors seeking the safe havens and forex opportunities of the dollar and Yen. The Yen did not react to the news that the Bank of Japan will leave rates unchanged at 0.1%.
Long Easter Weekend Ahead
Many forex brokers expect currency markets to be driven by stock markets in advance of the long Easter weekend. Should stocks rise towards the end of the week it could signal a change in risk sentiment and provide forex opportunities for investors.
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