Investors dumped commodity-based and growth-sensitive currencies and traders are looking increasingly nervous after data from Japan and China, the world’s second and third biggest economies, pointed to a darkening outlook for global growth. Despite central banks across the world launching new stimulus programmes this month that have given risk-taking a considerable boost, a drop in Japan’s leading share index suggests markets are now leaking confidence quickly. Economic news from Asia has provided the US dollar and Japanese yen an opportunity to repair their safe haven charm with the dollar looking especially stronger against the euro. The single currency is under heavy pressure as Spain continues to wobble while investors also expect to see more recession-indicating eurozone data. Risk aversion is weighing on sterling as traders cash in on the pound’s recent climb. However, the pound has made good progress against the euro and the Australian dollar after Bank of England minutes delivered no significant new concerns about the British economy.

Sterling

Sterling is posting strong gains versus its growth-linked rival currencies such as the Polish zloty and Australian dollar in response to weak manufacturing data from the Chinese economy which is weighing on the global growth outlook. The pound is also looking stronger against the euro after Bank of England’s minutes offered no great surprises about the direction of monetary policy in the .

US dollar

Sales of existing homes in the US reached a two-year high in August according to published official data, implying that a recovery in the housing market is gaining traction. Encouraging data would normally disrupt the US dollar, however, the currency is making strong progress despite the Federal Reserve’s latest dollar-diluting quantitative easing plans. Investors have turned noticeably cautious in recent sessions which is favouring the safer US dollar as concerns about Spain’s financial health re-emerge.

Euro

The euro has now fallen by as much as two per cent against the US dollar since

posting fresh four-month highs last week and it looks set to suffer again with investors anticipating data to reinforce predictions of a recession in Europe.

Japanese yen

The Japanese yen rebounded off multi-month lows and may continue to recover after another set of weak export data from hit investor sentiment in Asia which is fuelling demand for safe haven currencies.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.