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Risk Aversion Boosts US Dollar as Stocks Drop

October 23, 2012 at 12:59 by Miranda Marquit

Earlier, risk appetite was helping high beta currencies in Forex trading. Now, though, risk aversion has appeared and that is sending the US dollar higher as traders look for safe haven.

Risk aversion is returning to the currency market, thanks in large part to disappointing earnings in the United States. DuPont and RadioShack are among the companies that missed targets, and there are concerns about other companies right now. Many earnings have been lackluster anyway, and the current situation just isn’t helping matters.

As a result, the new risk aversion is overcoming the former risk appetite that helped high beta currencies like the euro earlier. Indeed, euro is now below the 1.30 level against the US dollar, and dropping as the dour mood about stocks also encourages Forex traders to look at the situation in the eurozone.

Even though there have been bouts of optimism, most of the problems remain for the 17-currency region, and Spain still hasn’t asked for a bailout. There is just a lot left to be resolved, and when things start getting disappointing, it’s easy to focus on some of those disappointments.

At 12:56 GMT EUR/USD is down to 1.2969 from the open at 1.3059. GBP/USD is down to 1.5951 from the open at 1.6016. USD/JPY is lower, down to 79.8530 from the open at 79.9425.

If you have any questions, comments or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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