Is risk back on? Euro rises in forex markets as dollar drops

Chris Lee

The move away from riskier currencies noted earlier in the week looked set to be coming to an end on Wednesday as currencies such as the euro managed to reverse some of their recent declines.

The euro was one of the day’s main victors and went up by 0.2% over the course of the day.

It reached a position of $1.0992 at one stage.

This meant it was out of the worst of its 28-month low spell, which saw it reach $1.0926 in the EUR/USD pair.

This came as a result of various developments, including a data release from the Purchasing Managers’ Index survey.

There was even some positive news for the pound.

The British currency managed to rise a little over the course of the day despite the ongoing political instability in the country.

The currency’s rise was likely due to a significant bill which received a majority of parliamentary support late last night, and which aimed to ensure that the country cannot leave the European Union without a deal on 31st October.

Several members of Boris Johnson’s Conservative Party voted for the deal, which left them expelled from the parliamentary party.

A general election is now considered likely, although it is not clear exactly what mechanisms would lead to one.

The pound responded to the news that a no deal Brexit was less likely by rising half a percentage point in its pair against the US dollar.

It was spotted at $1.2157 at one stage.

This was in sharp contrast to its terrible position on Tuesday, which saw it go beneath the crucial $1.20 benchmark.

Elsewhere, the US dollar lost out as negative economic indicators were released.

A publication from the Institute for Supply Management revealed that the manufacturing sector’s actions in the US are getting increasingly smaller – and that a drop was on the cards for the first time in several years.

It dropped by a fifth of a percentage point in the US dollar index, an artificial tool used for measuring how the greenback is performing in comparison to other major currencies from across the globe.

The index was seen at 98.803 at one stage.

The Japanese yen, which is often seen as a safe bet during times of risk aversion and as a problematic asset when risk is yearned for, was also down by a fifth of a percentage point.

It was seen at 106.19 yen in its pair with the US dollar.

The Australian dollar managed to rise a little in a clear sign that risk aversion was off.

This was also helped by the strength of the Chinese offshore yuan, which went up by 0.3% over the course of the day against the dollar.

The offshore yuan was seen at 7.1553 at one stage, which is a strong performance for the asset.

The Chinese yuan and the Australian dollar are intrinsically linked due to the nature of the countries’ trading relationship.

When China is performing well economically, the Aussie dollar tends to rise.

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Chris Lee
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