Currency markets were unsettled today as negative sentiment resumed and investors were reluctant to take on risk. As a result, safe havens were supported while the commodity currencies came under pressure.
The euro rallied versus the dollar to above $1.0900, supported by the risk off environment and was up 0.8% on the day so far. Sterling retained a weak bias and cable dropped to fresh 5-year lows below $1.4330.
The commodity currencies under-performed and oil has fallen back below $30 to a new 12-year low, reflecting a 5% decline on the day. Iran is expected to start exporting oil in the global markets as early as next week and this is also weighing on oil prices.
The Canadian dollar was hurt by the falling oil prices and reached fresh 12-year lows as USDCAD rallied fast from 1.4400 to 1.4545. Focus will be on the Bank of Canada policy meeting next week. A rate cut is expected.
The Australian dollar was the weakest of the majors, off nearly 1.5% to new multi-year lows. Against the greenback, the aussie reached $0.6862, the lowest since April 2009.
The yen outperformed as it enjoyed safe haven status and pushed the dollar back below the key 117 yen level. A deterioration in risk appetite combined with a raft of weak US data led to the dollar dropping to 116.58 yen, a near 5-month low.
US retail sales fell 0.1% in December from the prior month, against expectations for them to remain flat. But they were revised up in November to show a gain of 0.4% from 0.2%. US producer prices (PPI) also disappointed and fell in December by 0.2%. This was in line with expectations though but down from the prior gain of 0.3%. US industrial production declined again in December by 0.4%. The only bright spot in the string of US data releases today was the University of Michigan sentiment index which rose in January to 93.3 from 92.6 in a preliminary reading.
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