FXstreet.com

FX Commentary

This report has been deactivated

0

0

An overview of G10 equity betas

Wed, Mar 11 2009, 15:57 GMT
by Kasper Kirkegaard, Lars Rasmussen

Danske Bank A/S


EUR/USD equity beta at multi-year high

- Yesterday saw the biggest stock market rally this year, led by a strong performance in financials. This naturally spilled over to the FX market where we still see a very high correlation with equity markets. Given the high volatility in equities it is worth taking a look at the current FX betas (table below):

- AUD & NZD: Both AUD/USD and NZD/USD remain the main G10 currency pairs with highest sensitivity to equity markets - and betas have risen in recent months. This partly explains why AUD is sometimes referred to as a "fast" EUR.

- CHF & JPY: Both the defensive currencies have had their safe-haven status questioned in recent months - for CHF most likely due to an aggressive SNB and for JPY most likely due to poor domestic economic data. The equity beta has fallen for JPY and correlations have fallen for both in recent months. While CHF weakened yesterday, JPY was more resilient, emphasising its current decoupling with risk.

- EUR/USD: Both the EUR/USD beta and correlation stand close to a multi-year high. The high beta is not self-explanatory though and if driven largely by deleveraging flows (as we suspect), then the beta should fall markedly in an upwards trending equity market. That is, expect smaller co-movements during "good times".

- Scandies: Betas have risen strongly, suggesting that while currency specific themes remain key, market risk sentiment has become an increasingly important driver.

Published on  Wed, Mar 11 2009, 16:03 GMT


Archive

Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

Legal disclaimer and risk disclosure

This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Related reports

FX View - Headline unemployment rate creates dollar shocker by Interactive Brokers LLC
Fri, Nov 6 2009, 18:41 GMT

Forex Daily Overview - USD mixed, unemployment rises to 10.2% by Easy Forex
Fri, Nov 6 2009, 18:31 GMT

Forex Daily Analysis - USDJPY is moving towards support level at 89.55 by Investija.com
Fri, Nov 6 2009, 14:35 GMT

Forex Technical Report - U.S. Markets Brace for Jobs Data by ForexHound.com
Fri, Nov 6 2009, 13:29 GMT

Forex Technical Report - Dollar Trading Lower Ahead of U.S. Jobs Data by ForexHound.com
Fri, Nov 6 2009, 13:19 GMT

audusd, eurusd

View All

Related content


Interested in forex trading? forex brokerage firms!


FX Solutions LLC
Contact the broker/FDM
Open a demo account
FOREX.com
Contact the broker/FDM
Open a demo account
City Credit Capital (UK) Limited
Contact the broker/FDM
Open a demo account		Alpari (UK) Limited
Contact the broker/FDM
Open a demo account		GFT
Contact the broker/FDM
Open a demo account

GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2009 "FXstreet.com. The Forex Market" All Rights Reserved.