US Dollar Pulls Back From Multi Month Low

Dismal figures posted by General Electric and Bank of America have triggered a rise in risk aversion causing the US dollar to pull back from a 14 month low. General Electric reported a 42% decline in profits and Bank of America posted a quarterly loss sending investors and traders in search of safe haven assets. Investors were disappointed with the results after earlier in the week JP Morgan posted positive figures. Philip Lawlor of Nomura stated, “JPMorgan set the hurdle rate very high, and at the margin it’s difficult for the banks - you saw it with Goldmans yesterday - to now come in and have the same type of positive reaction.”

US Consumer Sentiment Down

US consumer sentiment fell as consumers remain concerned that recovery will be slow and drawn out. The combination of poor stock performance in Europe and the US and low US consumer sentiment triggered a round of risk aversion benefiting the US dollar. Shaun Osborne of TD Securities in Toronto stated, “It’s not a particularly good report as we saw a big drop in the outlook. It’s a case of poor data hurting equities but supporting the dollar in a risk-off and risk-on mentality.”

Commodity Based Currencies Perform Well

The dollar gained 0.5% on the euro and traded at $1.4872 on Friday and against the Japanese yen the dollar gained 0.6% trading at 91.09 yen. The pound fell to $1.6270 after hitting a three week high of $1.6401. The Canadian dollar fell for the second straight day as risk aversion trimmed demand for risky assets. The two day decline came after a rally that many believed would push the Canadian dollar to parity with the US dollar. Against the greenback the Canadian dollar was the fourth best performer after the Aussie dollar, the Brazilian real and the Mexican peso. All are commodity based currencies which have performed well in forex markets.

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