Forex Today: US Dollar extends recovery as markets react to US strike on Venezuela
Here is what you need to know on Monday, January 5:
The US Dollar (USD) gathers strength against its major rivals on Monday as market participants assess the potential implications of the United States' large-scale strike on Venezuela. In the second half of the day, the Institute for Supply Management (ISM) will publish the Manufacturing Purchasing Managers' Index (PMI) data for December.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.28% | 0.20% | 0.08% | 0.28% | 0.25% | 0.21% | 0.23% | |
| EUR | -0.28% | -0.08% | -0.17% | 0.00% | -0.03% | -0.06% | -0.04% | |
| GBP | -0.20% | 0.08% | -0.11% | 0.08% | 0.06% | 0.02% | 0.04% | |
| JPY | -0.08% | 0.17% | 0.11% | 0.19% | 0.16% | 0.12% | 0.15% | |
| CAD | -0.28% | -0.00% | -0.08% | -0.19% | -0.03% | -0.06% | -0.04% | |
| AUD | -0.25% | 0.03% | -0.06% | -0.16% | 0.03% | -0.03% | -0.01% | |
| NZD | -0.21% | 0.06% | -0.02% | -0.12% | 0.06% | 0.03% | 0.02% | |
| CHF | -0.23% | 0.04% | -0.04% | -0.15% | 0.04% | 0.01% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Over the weekend, the US military entered Venezuela, capturing and bringing Venezuelan President Nicolás Maduro and his wife, Cilia Flores, to New York. According to the latest developments, Maduro is being held at the Metropolitan Detention Center in Brooklyn and will face drug and weapons charges. Moreover, US President Donald Trump said that Washington might make a fresh military intervention if Venezuela’s interim president, Delcy Rodríguez, did not accommodate their demands.
Following a cautious opening to the week, the market mood seems to have improved by the European morning, with US stock index futures rising between 0.1% and 0.5% on the day. In the meantime, the USD Index gains nearly 0.3% and trades at its highest level in two weeks near 98.70.
Gold benefited from escalating geopolitical tensions and gathered bullish momentum early Monday. XAU/USD was last seen trading near $4,420, gaining 2% on the day.
Following the volatile action seen heading into the end of the year, Silver pushes higher on Monday and rises more than 3.5% near $75.50.
Pressured by the broad-based USD strength, EUR/USD stays on the back foot in the early European session and trades below 1.1700. The European economic calendar will feature Sentix Investor Confidence data for January.
GBP/USD edges lower in the European morning and trades below 1.3450. The Bank of England will release Consumer Credit and Net Lending to Individuals data for November on Monday.
After registering marginal gains in the previous week, USD/JPY stays quiet to begin the new week and moves sideways at around 157.00. Bank of Japan (BoJ) Governor Kazuo Ueda repeated earlier in the day that the Japanese central bank is expected to continue raising interest rates if the economy and prices move in line with their forecasts.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
