Advertisements
Home News Safe-Haven Currencies Surge Amid U.S. Economic Woes

Safe-Haven Currencies Surge Amid U.S. Economic Woes

by Barbara

The Japanese yen and Swiss franc surged to multi-month highs against the U.S. dollar on Friday, driven by a sudden downturn in U.S. manufacturing and growing fears of an economic slowdown. This shift prompted a sharp decline in both stock markets and bond yields.

The British pound fell to a one-month low, dropping nearly 1% overnight, as the Bank of England initiated a cautious rate-cutting cycle. Similarly, the euro slipped to a one-month low following dovish remarks from the European Central Bank (ECB).

Advertisements

On Friday, the yen strengthened by approximately 0.2% to 149.085 per dollar, briefly reaching 148.51—its highest level since mid-March. The Swiss franc rose to 0.8726 per dollar, its strongest since early February.

Advertisements

These were the only major currencies to gain against the dollar, which paradoxically serves as a safe-haven asset despite being the source of economic concerns.

Advertisements

The Australian dollar, sensitive to risk, fell 0.14% to $0.6493, continuing its previous session’s 0.52% decline. The downturn followed a major selloff on Wall Street, which saw Japan’s Nikkei index plummet more than 4% and South Korea’s Kospi drop 2.5%.

Advertisements

U.S. 10-year Treasury yields fell by 14 basis points to 3.965%, breaking below the 4% mark for the first time in six months.

Advertisements

Tony Sycamore, a markets analyst at IG, commented, “There was no refuge from the bleak economic data overnight, which intensified fears of a hard landing.”

The U.S. economic outlook will face a critical test later on Friday with the release of monthly payroll data. A weak report could heighten concerns about a hard landing and increase speculation about a 50-basis-point rate cut by the Federal Reserve in September, Sycamore added.

Following the dismal manufacturing data, traders are now estimating a 27.5% chance of a 50-basis-point rate cut by the Fed on September 18, up from 12% the previous day, according to CME Group’s FedWatch tool.

The British pound declined 0.09% to $1.2723, hitting a low of $1.27215—the weakest level since July 3. Bank of England Governor Andrew Bailey led a 5-4 vote to lower rates by a quarter-point to 5%, indicating a cautious approach moving forward.

Advertisements

The euro edged down 0.07% to $1.07845, after hitting a three-week low of $1.07775 overnight. ECB policymaker Yannis Stournaras warned of the risk that a weakening euro zone economy could push inflation below the 2% target, reinforcing his expectation of two rate cuts later this year.

You may also like

Rckir is a comprehensive financial portal. The main columns include foreign exchange wealth management, futures wealth management, gold wealth management, stock wealth management, fund wealth management, insurance wealth management, trust wealth management, wealth management knowledge, etc.

【Contact us: [email protected]

© 2023 Copyright Rckir.com [[email protected]]