Investors Dump Risky Assets
The euro fell on Friday as investors and traders remain concerned how Greece will refinance its debt. The rise in risk aversion benefitted the US dollar and the yen which are regarded as safe haven currencies. Declines in equities caused investors to dump riskier assets in favor of the dollar and yen. Recent US retail sales data also supported the dollar. Niels Christensen of Nordea in Copenhagen stated, “Risk aversion and speculation of Yuan revaluation is supportive for the yen. We’ve had some good data out of the U.S. lately, including retail sales on Wednesday, and the recent backdrop is supporting the dollar, while the Greece situation is weighing on the euro.” The Athens government has asked for talks with the EU and the IMF and many believe that the meeting is a first step for the troubled nation to seek outside aid. Details about how the loan mechanism would be implemented remain unclear causing investor concern. The euro was down We’ve had some good data out of the U.S. lately, including retail sales on Wednesday, and the recent backdrop is supporting the dollar, while the Greece situation is weighing on the euro.” The euro was down 0.3% vs. the dollar trading at $1.3533 and against the yen the euro fell 0.8% to 125.34 yen.
Pound Falls on Gridlock Concerns
The pound fell on concerns that upcoming elections could result with no clear victory for either party resulting in political gridlock which could hamper the UK’s ability to deal with ongoing economic problems. The high yielding Aussie dollar came under pressure and fell 0.4% vs. the greenback to $0.9310 and against the yen the Aussie fell 0.8% to 86.29 yen. The yen also gained on speculation that China may tighten policies and Greece may request the implementation of the $61 billion aid package. The dollar has fallen for the past two weeks against the yen after financial giant Goldman Sachs was charged with fraud by the US government making US assets less attractive to investors. Vassili Serebriakov of Wells Fargo & Co stated, “The Greece story isn’t going away soon, and we expect further tightening from China. That’s triggered some caution in the market, and that’s why you’re seeing the yen doing better.”
Kiwi and Aussie Under Pressure
The Kiwi dollar fell 2.1% against the yen 65.31 yen on speculation that investors will unwind recent carry trades. The Aussie dollar remains under pressure for the same reason. Markets will be watching the results of this weekend’s conference of EU finance ministers and Monday’s talks between Greece and EU and IMF representatives.
