• Equities fall hard as markets convert to cash.
  • Dollar is the overwhelming choice for the worried global economy.
  • Demand for the US dollar drives currency trading.
  • Sterling falls to 35 year low before recovering.

As corporations, investors and governments around the world rush to protect themselves from a global recession the asset of choice is cash and the currency is the US dollar.

Seeking the security of the world’s most liquid currency, deepest credit markets and largest economy, traders drove the dollar index to a three year high, currency pair after pair to multi-year lows and the pound sterling close to the nadir of the modern era.

US dollar advances

The flow driven nature of Wednesday’s move was evident in the closing rates, the most active pairs ended well off their worst levels of the day.  Once the buying pressure generated by market and stop orders slackened most pairs managed a modest recovery.

The pound fell 3.6% against the dollar closing at 1.1622 from an open at 1.2015 but intra-day it touched 1.1450, its lowest since 1985.  The euro saw relatively modest losses, shedding less than 1% to close at 1.0911, having opened at 1.0997 and dropped down to 1.0801.

Commodity currencies

Commodity currencies fared the worst with markets forecasting far lower demand for resources in the months ahead.

The Canadian dollar dropped to 1.4651 its weakest in over three years before closing at 1.4512 down 2.19% and a three year low.

The Australian dollar plunged to 0.5701 it’s poorest in 11 years from 0.6029, finishing at 0.5778, down 3.7%. Its antipodean colleague, the New Zealand dollar lost 3.2% to 0.5732, having reached 0.5701 also a 2009 financial crisis low.

Only the partial safe-haven currencies of the Swiss franc and Japanese yen were somewhat insulated from the strengthening US dollar.  The franc lost less than 1% closing at 0.9679 after starting at 0.9612 and the yen was essentially unchanged opening at 107.69 and ending at 107.93.

West Texas Intermediate lost 15.7% ending at $22.93, its lowest close in almost two decades, following an open at $27.22.

Equities suffered another in a lengthening string of collapses. In Europe the FTSE in London lost 4.05% and the German DAX 5.56%.   In the US the Dow tumbled 6.30%, 1338.46 points closing at 19898.92.

US Treasuries

The US 10-year Treasury, which on March 9th had hit an all-time record low yield at 0.498% as investors piled into safety, has reversed adding 70 points of return to finish at 1.205% on Wednesday.

In addition to the desire of bond owners to hold large cash balances as the economic outlook worsens, credit market anticipate large new supplies of Treasuries as Washington finalizes plans for a nearly $1 trillion stimulus and support package.

Prices on bonds with fixed coupon rates move inversely to yields. Credit traders anticipate that large new government offerings will drive bond prices down and rates up.

Markets around the world have crashed this month as investors, hedge funds and corporations have liquidated holding for cash trying to stockpile the asset most useful in adversity, the US dollar, sending its value soaring as they add to their currency balances.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD Weekly Forecast: Sellers gain confidence alongside the Fed

EUR/USD Weekly Forecast: Sellers gain confidence alongside the Fed Premium

The EUR/USD pair fell towards a fresh two-month low of 1.0900, finishing the second consecutive week in negative though little changed at around 1.0940.
Read full analysis
GBP/USD Weekly Forecast: Pound Sterling stays vulnerable ahead of UK inflation data

GBP/USD Weekly Forecast: Pound Sterling stays vulnerable ahead of UK inflation data Premium

The Pound Sterling (GBP) booked the second straight weekly loss against the US Dollar (USD), sending the GBP/USD pair to the lowest level in a month below 1.3050.

Read full analysis
Gold Weekly Forecast: XAU/USD holds above key support area after bearish action to start week

Gold Weekly Forecast: XAU/USD holds above key support area after bearish action to start week Premium

Gold (XAU/USD) declined sharply in the first half of the week but regained its traction after coming within a touching distance of $2,600.

Read full analysis
Bitcoin Weekly Forecast: Will BTC decline further?

Bitcoin Weekly Forecast: Will BTC decline further?

Bitcoin’s (BTC) price fell over 6% at some point this week until Thursday, extending losses for a second consecutive week, as it faced rejection from a key resistance barrier.

Read full analysis
RBA widely expected to keep key interest rate unchanged amid persisting price pressures

RBA widely expected to keep key interest rate unchanged amid persisting price pressures

The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.

Read more
Five best Forex brokers in 2024

Five best Forex brokers in 2024

VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals. 

Read More

Majors

Cryptocurrencies

Signatures