Risk-aversion Boosts Safe-haven Flows Into Dollar And Yen

Risk-aversion Boosts Safe-haven Flows Into Dollar And Yen



The dollar and the yen extended their Asian session's rally in early European trading on Tuesday as recent run of negative cues and a slide in stocks around the world prompted traders to seek safe-haven currencies.
The yen and the dollar are viewed as safe haven currencies and they often rally when the stock markets slide and conversely lose ground when the stock market's appetite for risk is more robust.
European shares tumbled as investors reassess the prospects of a recession in Europe and China's slower growth outlook. Thus far, the U.K. FTSE 100 index slumped more than 1 percent, Germany's DAX dropped 1.5 percent and France's CAC-40 index fell to 1.60 percent.
Global shares are trading in red after China slashed its projected economic growth for 2012 to 7.5 percent yesterday, its lowest growth target in 8-years.
This is the first time that China lowered its annual economic growth target after setting it around eight percent since 2005. Its economy grew by 9.2 percent in 2011 after an expansion of 10.4 percent in 2010, the Xinhua news agency reported.
Also, caution prevailed ahead of Thursday's deadline for Greece's private creditors to decide whether to sign off on a massive debt writeoff. The private sector bondholders' participation is essential for Greece to secure a second EUR130 billion international bailout.
The US dollar appreciated almost 0.8 percent to an 11-day high of 1.5760 against the pound around 5:15 am ET Tuesday from Asian session's 4-day low of 1.5884. On the upside, the greenback may find target around the 1.5720 level.
The yen jumped to a weekly high of 127.35 against the pound by this time, well above last week's psychological support of 130.0. If the yen strengthens further, it may challenge resistance at its 20-day SMA at 126.0.
U.K. house prices declined by 0.5 percent in February from a month ago, data from the Lloyds Banking Group's Halifax division showed today. This followed January's 0.6 percent increase and continues the mixed monthly pattern seen over the past year. Economists had expected a 0.3 percent rise for February.
At the same time, retail sales in the United Kingdom declined for a second consecutive month to 0.3 percent in February as consumers remained wary of spending due to unemployment fears and budget uncertainty, a survey by the British Retail Consortium showed.
The dollar touched nearly 3-week highs of 0.9183 against the Swiss franc and 1.3137 against the euro around 5:30 am ET. On the upside, the greenback may find target levels at 0.9210 against the alpine unit and 1.3115 against the common currency.
The Japanese yen continued to creep higher against its US counterpart in early European trading on Tuesday, hitting a 6-day high of 80.80 around 5:15 am ET. On the upside, the yen may find target around the 80.30 level.
The yen rose to 12-day highs of 88.10 against the Swiss franc and 106.22 against the euro around 5:15 am ET and both pairs leveled off thereafter. If the yen strengthens further, it may find resistance its 20-day simple moving average levels at 87.50 against the franc and 105.60 against the euro.
The yen also spiked higher against the commodity currencies, hitting a fresh 2-week high of 65.71 against the New Zealand dollar, 12-day high of 85.53 against the Australian dollar and a 6-day high of 80.83 against the Canadian dollar. On the upside, the Japanese unit may find target levels at 65.40 against the kiwi, 85.40 against the aussie and 80.0 against the Canadian dollar.
The Reserve Bank of Australia decided to keep its benchmark cash rate unchanged at 4.25 percent for a second consecutive time, as economic growth is expected to be close to trend and inflation close to target. The decision was in line with economists' expectations.


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