Dollar and Yen Gain

On Monday (March 30) the US dollar and the Japanese Yen gained broadly against other major currencies on interbank forex markets. Many interbank forex brokers expressed concerns about the possible bankruptcy of US automakers GM and Chrysler and sought the safe havens of the Yen and the US dollar.

Euro Pressured

Spain was forced to bailout a regional savings bank and that combined with an anticipated rate cut by the European Central Bank triggered a selloff of the Euro. Many interbank forex traders and experts reacted to poor stock market performance which also put pressure on the Euro. Todd Elmer of CitiFX in New York stated, “The poor start to the week in global equity markets has acted as a speed bump for the broad rally in risk appetite we’d been seeing, and its roots are in renewed concern about the financial sector and U.S. auto sector.”

Troubled US Automakers

US stocks fell after the Obama administration rejected requests from GM and Chrysler for more money and forced the resignation of GM’s CEO and pushed the automakers further down the road to bankruptcy. The Obama administration gave GM 60 days to devise a better restructuring plan.   The Euro fell to $1.3193 after achieving a high of $1.37 last week. The Euro also declined against the Yen to 127.98 on interbank forex markets.

US Troubles May Benefit Japan’s Automakers

Some forex traders including interbank forex brokers believe that the Yen’s gains may be tied to the perception that US automaker troubles will benefit the Japanese auto industry. Interbank forex brokers and investors are hoping actions by this week’s G 20 summit will restore investor confidence and are hoping for action to increase the International Monetary Fund’s lending capacity which would benefit emerging economies.

In the past few weeks there has been a rise in risk sentiment which has now been reversed. This reversal of risk sentiment has interbank forex brokers once again seeking the safe haven of the Dollar and the Yen.