Dollar continuing to gain from its ‘safe haven’ status, posting strong gains against the Pound and Euro. Could we see a fall in value of the AUD, NZD and ZAR as a result?

Cable exchange rates (GBP/USD) moved significantly as the US dollars ‘safe haven’ tag continues to lead investors in its direction. In a busy weak for Central Banks (we had decisions from Europe, UK and China) and Federal Reserve also hinted at no further quantitative easing (monetary stimulus) in the short term. I personally feel this trend is likely to continue and with super powers such as China surprising the market by cutting interest rates, global confidence is low and I feel this will hinder a number of currencies, particularly so called ‘riskier’ currencies. I believe the GBP/USD will continue to slide towards the 1.50 mark, bad news for those buying dollars, but I feel this increase in risk aversion could be better news for those buying the Aussie, Kiwi or Rand.

These three currencies are renowned as being three of the more risky currencies as they offer higher yields and can be adversely affected through the use of a ‘carry trade’. This is simply where investors will borrow in a low yielding currency (ie JPY, or CHF) and look to place funds in a currency offering greater returns (AUD, NZD, ZAR). Therefore you will often see large swings for these currencies and with the global economy in very uncertain times, I would not be surprised to see the levels drop off as investors unwind these positions. This can create some fantastic buying opportunities, but they can often be very short lived. Should you have an interest in any of these currencies and wish to discuss your options, then email Mike a mgv@currencies.co.uk 

As a specialist currency broker we assist a number of private and corporate clients helping them make informed decisions as when best to exchange. In order for us to achieve this it is best to have your account active and ready in advance of your trade, allowing us to keep you up to date with current market trends. To open your free no obligation trading account please email Mike at mgv@currencies.co.uk and I will run through the best contract to suit your transfer.