FOREX: Dollar, Yen Rise On Haven Demand Amid Global Slowdown Fears

By Ilya Spivak, Currency Strategist

Talking Points
  • US Dollar, Yen Rise on Haven Demand as Stocks Fall in Asian Trade
  • Chinese Exports Disappointment Tipped as Catalyst for Sentiment Slump
  • European, US Stock Index Futures Point to More Risk Aversion Ahead

The US Dollar and Japanese Yen outperformed overnight as stocks declined,stocking demand for the go-to safe haven currencies. The MSCI AsiaPacific regional benchmark index fell 0.3 percent, with thenewswires chalking up the selloff to Chinese trade data releasedover the weekend. The East Asian giant reported that exports grewat an annual rate of 18.4 percent, disappointing economists’expectations of a 31.1 percent increase. Given that China is theworld’s largest exporter, the outcome was interpreted toreflect slowing global demand.

We are skeptical of assigning too muchsignificance to the Chinese tradedata set however. Although certainly not a positiveoutcome, it didn’t represent anything particularly new.Indeed, the year-on-year exports growth rate has been trendinglower since May 2010. Rather, we suspect the flare-up of riskaversion reflects the gradual return of big-picture fundamentals asthe driving force for price action, with the Chinese data acting asa trigger rather than a catalyst in its own right.

With Greek fiasco seemingly in the rearviewmirror following last week’s successful PSI outing , investors likely reappraised the landscapeonly to be reminded of a Eurozone recession slated for this yearexpected to bring global GDP growth to the weakest since the GreatRecession. Friday’s strong US jobs report offered some support to risky assets after itcrossed the wires but seems to have lost its potency already astraders look ahead to Tuesday’s FOMC meeting. In thiscontext, good US data is likely translating into downgraded QE3expectations and weighs on hopes that a ramped-up North Americanrecovery will make for a greater counterweigh to the slump inEurope.

Looking ahead, stock indexfutures tracking key European and US benchmark indexesare pointing firmly lower in late overnight trade, hintingsentiment is likely to remain on the defensive and suggesting havencurrencies will continue to outperform against their majorcounterparts. The economic calendar is generally uneventful, leavelittle to stand in the way of established momentum (barringunscheduled developments, of course).

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Machine Orders (MoM) (JAN)

3.4%

2.3%

-7.1%

23:50

JPY

Machine Orders (YoY) (JAN)

5.7%

4.4%

6.3%

23:50

JPY

Domestic CGPI (MoM) (JAN)

0.2%

0.2%

-0.1%

23:50

JPY

Domestic CGPI (YoY) (JAN)

0.6%

0.6%

0.5%

0:01

GBP

Lloyds Employment Confidence (FEB)

-69

-

-73

5:00

JPY

Consumer Confidence (FEB)

39.5

40.5

40.0

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German Wholesale Price Index (MoM)

1.0%

1.2%

Low

7:00

EUR

German Wholesale Price Index (YoY)

2.6%

3.0%

Low

9:00

EUR

Italian GDP s.a. and w.d.a. (QoQ)

-0.7%

-0.7%

Low

9:00

EUR

Italian GDP s.a. and w.d.a. (YoY)

-0.5%

-0.5%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2985

1.3235

GBPUSD

1.5613

1.5784

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/03/12/FOREX_Dollar_Yen_Rise_on_Haven_Demand_Amid_Global_Slowdown_Fears.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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