Daily currency report

Investors shunned risky positions as tensions in the Middle East grew and there is a serious possibility of civil war breaking out in Libya, Africa’s largest oil producer. Naturally the safe haven dollar, yen and Swiss franc rose as market players sought after these currencies in times of uncertainty. The yen’s upward move emerged despite a Moody’s downgrade on the Japanese sovereign debt outlook. The New Zealand and Australian dollars tumbled after Christchurch, New Zealand’s second largest city, suffered its second earthquake in six months. Negative sentiment weighed on the euro despite a raft of record breaking eurozone indicators, however, the pound managed to hang onto recent gains as investors continue to speculate over higher interest rates in the UK. Stock markets fell and consequently emerging market currencies were also hit hard with the in-demand Polish zloty tumbling across the board. Geopolitical tensions in the Middle East and North Africa are turning bloody and therefore growing in influence on currency markets. Political unrest has now spread as far as Morocco and there are few signs of anti-government protests abating. Oil and commodity prices are rising, stoking serious fears of higher inflation particularly across Europe and the UK.

Sterling

Sterling held steady despite investors seeking to cut risky positions amid growing fears that unrest in the Middle East will continue to spread. The most notable economic consequence of the uprising in countries such as Libya is the rise of oil prices.

US dollar

US markets were closed for President’s Day holiday, however, this did little to stop the dollar rising across the board. The greenback firmed as traders cut back on risky positions and sought after safer assets as clashes between anti-government protestors and security forces in the Middle East and North Africa escalated.

Euro

Despite the encouraging data, the euro fell sharply against the dollar and Swiss franc as investors became increasingly risk adverse on geopolitical tensions. Markets are also concerned by the crushing defeat suffered by Germany’s ruling party in regional elections.

Japanese yen

Rating agency Moody’s has cut its outlook on Japan’s sovereign debt rating from stable to negative. Fortunately for the yen, the news is having little negative impact as investors remain spooked by violent clashes in the Middle East and North Africa, coupled with an earthquake in New Zealand. As a result, the yen remains in demand on safe haven buying as traders cut risky positions.

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