- US Dollar holds the ground in Asia session.
- Japanese Yen at one week high.
- Brexit worries escalate.
- Oil slides on no-deal Brexit probability spike.
Riskier currencies are on a back foot as stock market sell-off, oil prices and the increased chances of a no-deal Brexit started affecting investor confidence in the risk-on themes.
The haven-linked US dollar and Japanese yen gained at the expense of the pound, euro, and kiwi.
The dollar index is near one month high, trading against a basket of currencies. The pound is near six-week low on account of increased worries of a no-deal Brexit possibility. Meanwhile, the Japanese yen is near one-week high – 105.83 a dollar.
The fall in equities might continue to set the tone for the currencies in today’s trading and the upcoming ECB meeting tomorrow might add to more dollar buying. The equity futures, Nasdaq 100 futures and S&P 500 futures climbed off earlier lows, and this helped riskier currencies to witness less bearish pressure.
The pro-risk Australian and New Zealand dollars are near a two-week low but managed to recoup the losses in the earlier trading as US stock futures made a comeback. The Australian dollar was trading around 0.7215 US dollars while the New Zealand dollar was at 0.6618 dollars.
The recent fall of nearly eight Percent in the crude oil has also dragged the commodity-linked currencies like the Canadian dollar which fell to a three-week low of 1.3256 against one US dollar, and the Norwegian krone which hit the lowest level since late July.
Sterling recorded the most considerable losses among currencies as the fears grew that Britain might not adhere to its exit treaty with the European Union. The UK is planning to publish legislation today – as a framework for the country’s life outside the European Union. A government minister has indicated that the proposed legislation might be in slight contravention of the international law; this might jeopardize the ongoing negotiations between the UK and EU to hammer out a deal before the exit.
The pound was down 1.5 Percent against the dollar in overnight trading and edged further lower today to a six-week bottom of 1.2962 dollars in Asian session – a fall of over four Percent in just over a week. The currency also fell against the euro, trading at 90.57 pence – a six-week low and against the Yen; it has lost 2.6 Percent in just three sessions to 137.38 yen. The tech sell-off is the sharpest three-day decline since the pandemic selling in March and helped the dollar to gain ground against its competitors.
ECB chief economist Philip Lane’s last week comment that the exchange rate mattered for the monetary policy weakened the euro and helped the dollar to extend its pullback from the start -of-the-month lows – a gain of 1.4 Percent against the common currency.
The ECB will have its monetary policy meeting tomorrow, and the markets will closely watch any comments on the exchange rate. Lane’s words have helped the bears to put 1.20 dollars as an area of easy-sell at least for the time being, according to analysts; they expect the euro to fall to 1.17 dollars in a month.
