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FX round-up: Risk-off sentiment grips markets, safe havens shine once more

By Digital Look

Date: Friday 18 Aug 2017

FX round-up: Risk-off sentiment grips markets, safe havens shine once more

(ShareCast News) - The world woke up on Friday to the news that a terror attack claimed 14 lives in Barcelona and left around 100 injured.
This put markets in somewhat of a risk off mood with the usual safe haven currencies gaining ground.

USD/JPY traded to a day low of 108.61 by 1400 BST, but it moved higher by the London close to trade at 109.05, 0.48% lower on the day, marking a four-month low as risk appetite fades.

"It is difficult to find any other domestic catalyst to more than offset this negative factor." The yen's lurch higher, from nearly 111 per dollar on Wednesday to below 109 on Friday, has largely stemmed from technical trading and an increase in volatility, said Tim Alt, fund manager for rates and currencies at Aviva Investors in Chicago.

Dollar weakness over the last 48 hours or so has been down to Trump comments regarding the recent attack in Charlotsville, Virginia as well as his disolution of the White House's panel of business leaders.

"With President Trump's support from both within and outside of the White House waning, the uncertain US political environment is likely to keep the dollar pinned down at these low levels," said strategist Viraj Patel of ING in London.

USD/CHF was down 0.39% by 1400 BST, but afterwards recovered to 0.9641 or 0.14% higher for the day.

Against the dollar, sterling lost frurther ground to close the session 0.13% lower to 1.2852, ending the week at its lowest level since 12 July.

Recent weakness surrounding the pound was summed up by market analyst Ipek Ozkardeskaya at London Capital Group, who said "The sentiment in the pound remains heavy due to the Brexit risks, complex negotiations, business uncertainties and the Bank of England's dovish stance under the above-stated circumstances."

The euro closed the day on the up versus the greenback, adding on 0.21% to 1.1748 in a day of very choppy trading that saw the single currency trade sideways in a 1.1734/50 range, with no significant break in either direction.

In a note earlier on Friday, Morgan Stanley made their views clear stating, "We would express a short USD view via the EUR. The ECB has taken risks of a policy surprise out of the Jackson Hole meeting next week."

Sterling eneded the week lower against the single currency, trading 0.32% down on the day to 1.0942, it's lowest level since October 2016 where major support was seen in the 1.0937 area.

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