Risk-off trading was the dominant theme in the currency markets today, which was evident from the strengthening safe havens like the yen. Also other more liquid currencies like the euro and the dollar were in demand. As a result of risk aversion, commodity currencies suffered, like the Canadian and Australian dollars. With uncertainty as to when the Federal Reserve is going to raise interest rates and with concerns over the global economy, investors are unwilling to take on risk.
The euro advanced further today against the dollar to reach 1.1274 and rallied against the pound to a one-month high of 0.7410.
In European economic news, the Germany IFO Business Climate Index was better-than-expected for September at 108.5, above expectations of 107.9. However, this data was collected before the VW emissions scandal.
Norway’s Central Bank cut interest rates from 1% down to 0.75%, consequently weakening the Norwegian Krona. The dollar jumped to 8.4842 from 8.2599, the highest level since 2002.
Sterling remained as one of the worst performers this week and came under renewed pressure today. It extended losses into a fifth consecutive day versus the dollar and risks losing the key 1.52 handle after briefly dipping below it.
The Canadian dollar continued to weaken today, sending the US dollar to a fresh 11-year high against it at 1.3415. Another commodity currency, the Australian dollar, lost the 0.70 handle to fall to 0.6937.
The US dollar fell below the key 120 yen level to as low as 119.35. The main risk event for the greenback will be a speech by Federal Reserve Chair Janet Yellen at the University of Massachusetts Amherst later today. Her speech is titled: “Inflation Dynamics and Monetary Policy”. Investors will be anxious to hear of she will give more clarity on the Fed’s intentions on the timing of a rate hike.
US data released today included durable goods order, jobless claims and new home sales. August durable goods fell 2%, the largest drop since March, as expected but comes after gains of 2.1% in July. The data which excluded transportation came in flat, missing forecasts for a 0.1% gain. Other US data showed initial jobless claims rose 3,000 to 267,000 claims in the week ending September 19th but below market expectations of 271,000. New home sales rose at an annual rate of 552,000 in August , the highest level since early 2008 and above forecasts for 515,000 .
In commodities, the price of gold jumped higher to 1154.90 due to the softer dollar and ahead of Janet Yellen’s speech.