Possible Pandemic Affects Exchange Rates

Currency exchange rates can be affected by a wide variety of factors. Political events, economic news and reports, and even natural disasters can affect currency exchange rates. The recent news of a possible global pandemic of swine influenza has had an effect on currency exchange rates. On Monday the US dollar had fallen against major currencies as risk sentiment among investors increased. Traditionally the US dollar is seen as a safe haven in times of economic trouble as is the Japanese Yen.

Mexican Peso Loses on Pandemic Fears

Swine flu, which first appeared in Mexico, has spread to several other countries with confirmed cases around the globe. The possibility of a pandemic has sent investors flocking to the safe haven of the US dollar affecting forex currency exchange rates including the Euro to Dollar rate. The Mexican Peso has fallen 3% against the dollar because of pandemic fears. An announcement by an ECB official that the bank was ready to use quantitative easing measures put more pressure on the euro to dollar rate.

US Housing Data Triggers Rise in Risk Appetite

On Tuesday risk sentiment rose as data showed that the pace of declining home prices in the US slowed causing many investors to believe that the housing market has hit bottom. Concerns about the health of the US banking sector limited gains by the euro and the yen hit a 7 week high in the yen vs. euro currency exchange rate.

WHO Raises Pandemic Alert

The euro was trading at $1.3051 down 0.3% against the dollar. The euro to dollar exchange rate has been hovering around $1.30 for the past few trading sessions. The World Health Organization raised its pandemic alert from phase 4 to phase 3 affecting global currency exchange rates. The organization did not suggest any travel bans or border closures.

The influenza news is a prefect example of how non economic factors can affect currency exchange rates.