Daily currency report

Extreme movements in currency markets have been seen as the Japanese yen and the Swiss franc have strengthened, while currencies such as the Aussie dollar and Norwegian krone have weakened. The move was triggered by two events. First, a string of strong aftershocks in Japan has increased fears of a more serious situation developing at the Fukushima nuclear facility. Fears were stoked when the level of the crisis was moved to seven, which puts it on a par with Chernobyl. Secondly, Goldman Sachs suggested selling commodities, which has dampened the price of oil. The dollar has an inverse relationship with the price of oil. Sterling trade has been somewhat limited against the dollar and euro as investors await the CPI data.

Sterling

Sterling has weakened slightly against the euro and the US dollar after economic data showing soft consumer demand and falling house prices was released in the overnight session. The British Retail Consortium retail sales survey dropped sharply for the month of March, suggesting consumer demand remains weak and an economic recovery fragile.

US dollar

The US dollar is advancing on the back of weaker energy prices. There has been a major adjustment in currency markets despite some dovish comments from two FOMC members. Investors are currently getting out of long commodity positions and taking a “risk off” approach to trade.

Euro

The euro could run into some trouble with weak economic data coming from Germany. The German ZEW investor sentiment survey fell unexpectedly last month and could do the same in this month’s release. Investors became nervous over the outlook for Germany after the European Central Bank signalled it would be tightening monetary policy and after Japan’s triple disaster threatened the outlook for global growth.

Japanese yen

The Japanese yen saw strong gains in the overnight session. A string of heavy aftershocks has prompted the same sort of movement in currency markets that was seen after the March 11th quake. The speculative trade to buy yen will be limited, however. The upside for yen will be limited by intervention by G7 central banks, who have agreed to control the value of the currency through direct currency intervention.

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