The dollar opens at three-week lows against the Swiss franc as market players fret over the US economy’s exposure to tensions in the Middle East. As oil prices rocket, stocks tumbled on concerns that a sharp spike in fuel prices could have a detrimental impact on growth prospects in the US, the world’s largest oil consumer. Financial markets fear the turmoil in Libya could spread to other oil producing nations in an area where almost 60 per cent of the world’s total oil reserve’s are held. Naturally oil prices jumped, reaching two-and-the-half-year highs while the price of gold, seen as an inflation hedge, soared. Safe haven buying was the main theme, allowing the franc and Japanese yen to make strong gains. Currencies strongly linked to growth tumbled while the pound suffered further after the Bank of England’s Adam Posen talked up his case for loose monetary policy. The Australian and New Zealand dollars continued to fall sharply in the aftermath of New Zealand’s worst earthquake in 80 years.
Sterling
The pound stumbled, hurt by dovish comments from the Bank of England’s Adam Posen. Mr Posen backed his long campaign for looser monetary policy, playing down the threat of inflation.
US Dollar
Investors overlooked February’s consumer confidence index which rose to a three-year high, dumping the dollar in favour of safer assets including the Japanese yen and gold. More of the same should be expected with bloodshed in Libya likely to negatively impact other oil producing nations in the Middle East.
Euro
The euro rallied after initially coming under pressure as investors, spooked by the uprising in North Africa and the Middle East, cut risky positions. The single currency found support after European Central Bank member Yves Mersch talked up inflation risks and need for higher interest rates, a view already echoed by other policy makers.
Japanese yen
The yen continued its ascent as Middle East concerns threaten to hamper global growth prospects. As a result, investors moved quickly into the Japanese currency, seen as a secure investment in times of uncertainty. The move came despite dismal domestic news which highlighted the fragility of the Japanese economy, recently overtaken by China as the world’s second largest.
Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/