Japanese yen and Swiss franc rise on safe-haven demand due to renewed tensions in Ukraine: Aug 18, 2014

Market Review - 15/08/2014 18:08GMT 

Japanese yen and Swiss franc rise on safe-haven demand due to renewed tensions in Ukraine

U.S. dollar fell against the Japanese yen to an intra-day low of 102.14 after heightened tension in Ukraine that saw the government's artillery destroy a "significant" part of a Russian armored column. Germany's DAX and France' CAC-40 closed down 1.7% n 0.9% respectively. Dow Jones index fell fm 16775 to an intra-day low of 16575 before paring some of the losses. 

Ukrainian military spokesman said on Friday 'Ukraine forces engaged Russian armored column on Ukrainian soil; Ukrainian forces had tracked Russian armored column after it crossed border into Ukraine.' Ukraine Presidential website stated 'President Poroshenko told British PM that Ukrainian artillery destroyed part of Russian armored equipment which crossed the border during night.' 

Despite dollar’s brief rise to 102.71 in New York morning, the greenback fell sharply on safe-haven demand after the news. The Swiss franc hit a 19-month high against the euro and a three-week peak versus the dollar on the news. EUR/CHF and USD/CHF fell to 1.2086 and 0.9025 respectively. Investors have also bought the greenback against emerging market currencies in periods of financial or geopolitical stress. 

The single currency found renewed buying interest at 1.3359 in Asian morning on Friday and euro climbed to an intra-day high of 1.3412 in New York morning after the release of a series of U.S. economic data, including NY Fed manufacturing, PPI, foreign treasury buy, industrial and manufacturing output and University of Michigan sentiment. The pair later retreated to 1.3378 in part due to active cross buying in Japanese yen versus the euro after the news. EUR/JPY tumbled from 137.62 to 136.77. 

The British pound ratcheted higher in European trading after release of key U.K. GDP data. Although short-term speculators tried to test the pound's downside right at European open earlier and sold cable at 1.6696, pushing price to 1.6676, however, short-covering ahead of the GDP lifted the pair and when the data showed Britain's annual growth maintained momentum and rose 3.2% (vs forecast of 3.1%, Q/Q came in as per estimate at 0.8%) in the 2nd quarter, more buyers stepped in, price climbed to 1.6701 and later 1.6702 in New York morning before retreating briefly to 1.6680. 

In other news, Fed's Kocherlakota said 'Fed is long way from inflation goal, some way from employment goal; inflation won't reach Fed's 2% goal until 2018; persistently below-target inflation means resources remain underutilized; sees unemployment rate falling to 5.7% this year; drop in jobless rate masks continued weakness in labor markets.' 

Next week will see the release of U.K. rightmove house prices, China house prices, eurozone eurostat trade and U.S. NAHB housing market index on Monday; 

New Zealand’s producer prices, RBA meeting minutes, eurozone current account, U.K. CPI, PPI and RPI, U.S. building permits, core CPI, housing starts, Redbook and Cleveland Fed CPIon Tuesday; 

RBA’s Stevens testimony, Japan’s exports, imports and trade balance, Australia’s Westpac leading economic index, Japan’s all industry index, Germany’s producer prices, BOE’s meeting minutes and CBI trend, Canada’s wholesale trade and U.S. FOMC minutes on Wednesday; 

Japan’s manufacturing PMI, China’s HSBC manufacturing PMI, Swiss trade balance, France’s Markit manufacturing and service flash PMI, Germany’s Markit manufacturing flash PMI, eurozone’s manufacturing and service flash PMI, U.K. PSNCR and retail sales, U.S. jobless claims and Markit manufacturing PMI, eurozone consumer confidence, U.S. Philly Fed business index, exiting home sales and existing home sales on Thursday; 

Canada’s CPI and retail sales on Friday.