Dollar Shows Weakness In Light Of Iraq Situation
The Pound advanced above the $1.70 mark for the first time since 2009 early on Monday and strengthened against the majority of its most traded peers after Bank of England Deputy Governor Charlie Bean said that he would welcome a rise in interest rates as it would indicate that the UK economy was returning to normal. Against the Euro the currency was at its strongest level in 19-months.
The US Dollar was weaker against the Japanese Yen as concerns increased over the escalating conflict in Iraq. Demand for safe haven currencies in general have been bolstered by the situation. Also aiding the Yen are concerns over the tenuous situation in Ukraine. Investors were also cautious ahead of the outcome of the upcoming Federal Reserve policy meeting on Wednesday, as they await fresh indications regarding the timing of possible interest rates increases.
The Euro was at a 19-month low against the Pound and was weaker against the majority of its major peers as demand for the currency remained under pressure from the ECB’s recent interest rate cut. Against the safe haven Yen the Euro was at a four-month low as events in Ukraine and Iraq continued to spook investor sentiment.
The ‘Aussie’ was weaker against the safe haven US Dollar as demand for perceived riskier assets waned as the conflict in Iraq escalated. The prospect of military intervention by the US has raised concerns that the conflict could draw in other nations, like Iran.
New Zealand Dollar
The New Zealand Dollar is trading close to a five-week high against the US Dollar and was retaining its gains against the Pound. The ‘Kiwi’ is continuing to find support from last week’s decision by the RBNZ to raise interest rates for a third time. The currency could face volatility however if the Iraq situation continues to deteriorate.
The Canadian Dollar followed the other commodity-driven and higher-risk assets lower as fears over the Sunni insurgency in Iraq weighed upon investor sentiment. Concerns that a fall in the world’s oil supply could occur as a result of the conflict is sending oil prices higher, something that could offer support to the ‘Loonie’.
South African Rand
The Rand fell against the majority of its most traded peers as demand for riskier assets declined due to the conflict in Iraq. The Rand also remains under pressure from last week’s decision by credit rating agency Fitch to change South Africa’s outlook from stable to negative.
Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.
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