Investors in currency markets have been reading up on how a nuclear reactor is built, how safety measures are taken and how it is run, as the situation at the Fukushima nuclear power plant worsens. An increasing number of governments are attempting to pull their citizens out of Tokyo at the moment. Fear that a nuclear meltdown could occur increased last night, sending the safe-haven Swiss franc to record highs against the US dollar. The move against the dollar helped lift the currency against other currencies. The yen has also raced higher, touching record highs against the US dollar. Speculative flows are said to be behind the yen’s gains. At the opposite end of the yen and franc positive trade is the weakening of so-called commodity currencies such as the Aussie, New Zealand and, to a lesser extent, Canadian dollars. These currencies have faced selling pressures as investors are seen fleeing risk.

Sterling

Sterling has seen relatively calm trade compared to yen and Swiss franc movements. Against the US dollar and euro, the pound has traded in ranges which would be considered normal.

US dollar

The US dollar has fallen to record lows against the Swiss franc and Japanese yen. The sudden drop in the dollar came about after fears of a nuclear meltdown in Japan increased. News was released that pools containing highly radioactive spent fuel rods have run dry, increasing the risk of a meltdown. Japanese self-defence forces have resorted to dumping water by helicopter over the reactors in an effort to keep the rods cool. Investors therefore moved funds into safe-haven currencies such as the franc.

Euro

News that in normal times would have sent the euro into a tailspin saw little impact. The downgrade of Portugal’s sovereign debt rating by Moody’s barely moved currency markets. This signals just how intense the focus is on Japan at the moment.

Japanese yen

The Japanese yen has now seen a fresh all-time high against the US dollar of 76.25. The race higher came after comments were made by the EU Energy Commissioner, who said that the nuclear situation in Japan had spiralled “out of control”. The comments sparked a sell-off in equity markets and sent investors fleeing into the safe-haven Swiss franc. Speculators drove the yen higher, betting that insurance payouts as well as companies needing to repatriate funds in the future will strengthen the yen in the coming days.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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