Tuesday, 6 March 2012

Daily Forex Brief London: Tuesday 6th March 2012


It's the Aussie and Kiwi that were hurting overnight, the Kiwi taken to a five-week low vs. the USD. Whilst there were domestic factors that were evident in both moves, the wider tone is one of more caution so far this month. There's a certain dynamic at play, in that there is a concern that the large amount of cash that European banks are currently sitting on could shift the euro into becoming a carry currency. But the more important issue is that where the cash might go. There are concerns with all the high yielders that have done well in recent months, such as Brazil's desire to weaken its currency and the simple fact that many are viewing the dollar bloc as looking rich, especially if we are entering a period of slower growth in China. Furthermore, the impetus to invest in eurozone debt is less than was the case in December, given the rally in yields seen over the past two months. For now, the cash seems happy to sit at the ECB, but we've got to watch the numbers given this situation is unlikely to last.

  • The ECB numbers
  • Russia's slow road to ruin
  • China's subtle shift

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