Dollar at One Month High

The US dollar hit a one month high as UK banking woes and falling stocks in Europe and Wall Street dampened risk sentiment. The pound fell on Tuesday as several UK banks underwent shake ups. Bank of Scotland shares fell 5% after the bank agreed to sell some of its businesses. Currency traders remain wary in advance of meetings of the US Federal Reserve and the European Central Bank. The Fed is widely expected to keep rates at near zero for an “extended period.” Andrew Robinson of Saxo Capital Markets stated, “We have a slew of central bank meetings starting today. It’s going to be a bit uncertain and nervous, and under the circumstances a bit of range trading.”

Aussie Falls on Rate Hike

The Aussie which has been a big winner lately fell after the Reserve Bank of Australia raised rated from 3.25% to 3.5% leaving investors guessing when the central bank would hike rates again. The Aussie fell to $0.8957 from a high of $0.9042. Other commodity based currencies rose in Asian markets after the International Monetary Fund announced the sale of 200 tons of gold to the Reserve Bank of India.

Stocks Hit Four Week Low

On Tuesday global stocks hit a four week low and UK banking troubles spurred risk aversion benefiting the US dollar. Poor results posted by UBS UBSN.VS and bank shake ups in the UK prompted investor concerns about the health of banking systems. Banking giant CIT filed for bankruptcy. David Thebault of Global Equities in Paris stated, “UBS just posted ugly results that bode ill for European bank results and CIT just filed for bankruptcy. This raises the question: isn’t it too early to pay back government money?”

G 20 Conference Ahead

Also dampening risk sentiment is the upcoming G 20 conference scheduled for this weekend in Scotland and the US jobs report due Friday. Forex traders and investors will have a slew of information to sort through this week.