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Dollar Climbs as Safety Demand Rises on Markets

July 4, 2009 at 7:43 by Jan Baros

US DollarThe dollar ended this week posting gains versus all 6 major currencies, as another wave of pessimism caused by grim reports in U.S. and U.K. spurred demand for the safety of the greenback.

Commodity linked currencies like the Australian dollar, and emergent-markets currencies like the South Korean won posted significant losses against the greenback, after a report in U.S. indicated more-than-expect job cuts, inflating risk aversion among traders, who immediately sold high-yielding assets to purchase assets priced in dollar, which are more reliable in times of uncertainty. Even the yen, which is often associated as a refuge currency during times of crisis failed to end the week positively against the U.S. dollar, as speculations in Japan this week suggested that the country may invest 10 percent of its public pension-reserve funds in high-yielding assets, damping demand for the safety of the yen.

Currency strategists affirm that this kind of reaction in markets was expected in case the employment figures in U.S. failed to rebound, fears that the global slump might be prolonged for an undetermined amount of time were already significant, and negative data like this week’s U.S. report indicating further job cuts rose risk aversion to high levels among traders, which were investing massively in high-yielding currencies, betting in a quick global economic recovery.

USD/KRW ended the week at 1265.90 from a opening weekly price of 1233.04. USD/JPY followed the same trend ending the week at 96.02 from 95.35. AUD/USD fell to 0.7967 from 0.8015.

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