12.05.11

Risk Appetite hurts Safe-Havens

The previous trading week has been dominated by an increasingly good sentiment which has known quite an expansion at the end of the week. This risk appetite has had quite a negative effect upon safe-haven currencies throughout the week, causing the most damages to the US Dollar which is already in a difficult situation due to the fact that banks all over the world are doing their best in keeping the value of the currency low so that the global economic crisis does not have so many bad consequences upon their economies.

Friday was the first day when the US Dollar started to grow a little, suggesting the fact that the risk appetite sentiment may be over. This growth has also been correlated with the fact that the European concerns are not yet totally over and with the fact that the fundamental data concerning the US showed some positive figures. The US manufacturing PMI grew from 50.8 to 52.7 during the month of November, while the construction spending increased by 0.8 percent during the month of October, double from the 0.4 percent which has been forecasted. However, the US unemployment claims also grew from 396,000 to 402,000 during the previous week, while the entire global economy is suffering, fact which can be seen if looking at the China manufacturing PMI, which has decreased from 51.0 to 47.7 in November, which is the fastest pace of decrease registered since March 2009.

This wave of risk appetite has been generated by the news according to which six of the major central banks around the world decided to bring down the interest rates on US Dollar swaps in order to keep the economy running. This has caused the US Dollar to fall against most of its major counterparts, including the Swiss franc, which sometimes continues to act as a safe-haven, despite the Euro-peg, causing the currency to only manage to grow against the Japanese Yen. However, the news regarding the slowdown of the Chinese manufacturing field has caused the risk appetite to slow down since Friday. However, the good data of the US non-farm payrolls is also a factor which is to sustain the US Dollar in these difficult times.

The Japanese Yen also fluctuated against the US Dollar this week, as the greenback started the week well, lost on Wednesday, but started to win again at the end of the week.

The Swiss Franc has had a difficult week as rumors that the Swiss National Bank is planning another intervention on the currency started to show. It seems that, despite the Euro-peg performed by the SNB in September, the nation’s currency continues to appreciate, so the SNB is considering another intervention in its attempt of maintaining an equilibrated internal economy. The bank is considering selling “unlimited quantities” of the Swiss Franc as to trim the currency’s appreciation.

The risk appetite sentiment is likely to continue to be felt throughout the week to come, unless more negative data is to be disclosed, and this may mean that the safe-haven currencies are to continue to be put in a difficult situation.

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