Forex News
Michael Pfister at Commerzbank notes that higher Oil prices and a stronger Swiss Franc are offsetting each other on inflation, leaving Swiss price pressures subdued. With the Swiss National Bank stepping up verbal intervention against Franc strength and likely to move to active intervention, he expects the foreign exchange market to probe stronger CHF levels only gradually.
Franc strength versus imported inflation
"Yesterday's Swiss inflation figures for February were rather unspectacular. The headline rate was 0.1 percentage points higher than expected, while the core rate was 0.1 percentage points lower."
"Furthermore, Swiss inflation has remained at this low level for many months. Even the conflict in the Middle East is unlikely to change this. Oil prices are rising, which will likely push up transport prices in Switzerland."
"However, the stronger franc, which is a result of risk aversion, is easing imported price pressure. It is difficult to quantify how these two factors balance each other out."
"The Swiss National Bank (SNB) is unlikely to want to risk falling short of its inflation target, and has therefore significantly stepped up its verbal interventions against the franc's appreciation this week. Such warnings from the SNB are rather rare, so I would not expect too many more."
"The next step is likely to be active intervention. Therefore, the foreign exchange market should only test stronger CHF levels very slowly."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
China's 15th Five-Year Plan (2026–2030) was officially submitted for review to the National People's Congress (NPC) on Thursday. This strategic blueprint marks a critical shift toward "high-quality development" and technological self-reliance to navigate a more volatile global environment.
Key quotes
Use high-value scenarios to drive deployment, iteration, and upgrades of model applications.
Advance general-purpose foundation models and industry-specific models in parallel.
Explore development pathways toward general artificial intelligence.
Encourage innovation in multimodal AI, agents, embodied intelligence, and swarm/group intelligence.
Speed up research on more efficient training and inference methods.
Increase long-term, stable support for young stem talents engaged in basic research.
Build high-level research universities into the main force for basic research and main base for talent cultivation,
Construct regional sci-tech innovation centres, industrial sci-tech innovation hubs.
Plans to make back up for all key industries.
For "AI+" action plan, deploy ai across the full industrial chain—design, pilot testing, production, and operations.
For "AI+" action plan, in services, including software and it, finance and commerce, transport and logistics, drive widespread use of intelligent terminals and agents.
For "AI+" action plan, develop native ai apps for efficiency and companionship.
For "AI+" action plan, explore new human–machine collaboration workforms, apply embodied intelligence in labor-shortage and high-risk jobs.
For "AI+" action plan, expand ai use in market regulation, workplace safety oversight, disaster prevention and relief, public security, cyberspace maintenance, and ecological and environmental protection.
For "AI+" action plan, explore a safe governance system coordinating natural persons, digital humans, and intelligent robots.
Vigorously develop venture capital for sci-tech, facilitate foreign investment in equities and venture capital.
Accelerate construction of national strategic talent forces around innovation needs.
Increase training and support for strategic scientists and leading sci-tech research talents.
On university degrees: make unconventional arrangements for urgently needed disciplines in emerging fields like AI, integrated circuits.
Coordinate the orderly construction of AI data centres, promote large-scale green development of AI data centres.
Steadily promote deployment and application of large-scale AI models in govt sector.
Promote establishment of AI governance framework with broad intl participation.
Build open global ai ecosystem, support global south countries in strengthening AI capabilities.
Severely crack down on infiltration, sabotage, subversion, and separatist activities by hostile forces.
Prioritize safeguarding major security issues concerning the long-term stability of the country.
Strengthen the fight against sanctions, interference and long-arm jurisdiction.
Market reaction
At the press time, the AUD/USD pair is down 0.60% on the day to trade at 0.7035.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- Asian stock markets regain ground after plummeting for three trading days.
- Iran denies reports stating Tehran’s willingness to talk to end the war.
- China pledges loose monetary and fiscal policy to boost economic growth.
Asian stock markets recover significantly on Thursday after facing a bloodbath in the last three trading days. The strong recovery move in equity markets from the largest continent seems to be backed by the arrival of significant value bets after plunging due to the war in the Middle East.
As of writing, South Korea’s KOSPI is leading Asian equity markets with 12% gains, Nikkei 225 soars 2.45%, Shanghai surges almost 1%, and Nifty50 jumps 0.75%.
The recovery move in Asian stocks could be short-lived as Iran has clarified that it has not called for talks regarding the end of the war with the United States (US) and Israel, and is preparing for a prolonged war. “No message has been sent from Iran to the US, nor will any response be given to US messages,” an official from Tehran said, Tasnim reported.
On late Tuesday, a report from the New York Times (NYT) stated that Iran’s Ministry of Intelligence reached out indirectly to the US Central Intelligence Agency (CIA) with an offer to discuss terms for ending the conflict.
Asian stocks have bled significantly in the past few trading days as the Middle East conflict has resulted in a sharp increase in the oil price. Theoretically, higher oil prices prompt inflation and diminishes purchasing power of households.
Meanwhile, the pledge from Beijing to continue its loose fiscal policy has also strengthened Chinese equity markets. Earlier in the day, China’s Premier Li Qiang said in the annual report of this year's meeting of the National People's Congress (NPC) that Beijing will continue its moderately loose monetary policy and fiscal stimulus to promote economic growth. However, it has reduced the current year’s economic growth target to 4.5%-5% from 5% achieved last year.
AsianStocks FAQs
Asia contributes around 70% of global economic growth and hosts several key stock market indices. Among the region’s developed economies, the Japanese Nikkei – which represents 225 companies on the Tokyo stock exchange – and the South Korean Kospi stand out. China has three important indices: the Hong Kong Hang Seng, the Shanghai Composite and the Shenzhen Composite. As a big emerging economy, Indian equities are also catching the attention of investors, who increasingly invest in companies in the Sensex and Nifty indices.
Asia’s main economies are different, and each has specific sectors to pay attention to. Technology companies dominate in indices in Japan, South Korea, and increasingly, China. Financial services are leading stock markets such as Hong Kong or Singapore, considered key hubs for the sector. Manufacturing is also big in China and Japan, with a strong focus on automobile production or electronics. The growing middle class in countries like China and India is also giving more and more prominence to companies focused on retail and e-commerce.
Many different factors drive Asian stock market indices, but the main factor behind their performance is the aggregate results of the component companies revealed in their quarterly and annual earnings reports. The economic fundamentals of each country, as well as their central bank decisions or their government’s fiscal policies, are also important factors. More broadly, political stability, technological progress or the rule of law can also impact equity markets. The performance of US equity indices is also a factor as, more often than not, Asian markets take the lead from Wall Street stocks overnight. Finally, the broader risk sentiment in markets also plays a role as equities are considered a risky investment compared to other investment options such as fixed-income securities.
Investing in equities is risky by itself, but investing in Asian stocks comes along with region-specific risks to be taken into account. Asian countries have a wide range of political systems, from full democracies to dictatorships, so their political stability, transparency, rule of law or corporate governance requirements may diverge considerably. Geopolitical events such as trade disputes or territorial conflicts can lead to volatility in stock markets, as can natural disasters. Moreover, currency fluctuations can also have an impact on the valuation of Asian stock markets. This is particularly true in export-oriented economies, which tend to suffer from a stronger currency and benefit from a weaker one as their products become cheaper abroad.
- US Dollar Index strengthens to around 99.00 in Thursday’s early European session.
- Fears of a prolonged war in the Middle East boost the safe-haven flows, supporting the DXY.
- US services sector activity surged to a 3.5-year high in February.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 99.00 during the early European trading hours on Thursday. The DXY edges higher amid uncertainty and persistent geopolitical risks in the Middle East.
Israel said it was launching new strikes across Iran as well as against what it described as Hezbollah infrastructure in Beirut. Meanwhile, the Iranian government denied reports that it had sent a message to the US amid the ongoing conflict.
Tehran declared that the armed forces had prepared for a long-term war instead of negotiating. Fears of a prolonged war could drive traders toward safe-haven currency such as the US Dollar in the near term.
Economic activity in the US service sector gathered momentum in February, with the SM Services PMI rising to 56.1 from 53.8 in January. This figure came in stronger than the market expectations of 53.5. The resilient economic data might contribute to the DXY’s upside.
Markets widely expect the US Federal Reserve (Fed) to leave the interest rate unchanged until the summer, though US President Donald Trump has pushed for lower rates.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- The Indian Rupee gains sharply in the opening trade against the US Dollar after the RBI’s intervention.
- FIIs selling and higher oil prices could weigh on the Indian Rupee.
- Investors await the US NFP data for fresh cues on the current state of the labor market.
The Indian Rupee (INR) surges in the opening trade against the US Dollar (USD) on Thursday. The USD/INR pair plunges to near 91.80 as the Reserve Bank of India (RBI) has intervened in the foreign exchange market to offer support to the Indian Rupee against one-way excessive moves, according to Reuters.
The RBI was highly anticipated to intervene as the USD/INR pair hit a fresh all-time high of 92.67 on Wednesday amid a significant outflow of foreign funds from the Indian stock market and higher oil prices due to the war in the Middle East.
In the first two trading days of March, Foreign Institutional Investors (FIIs) have offloaded their stake worth Rs. 12,048.29 crore, almost double what they pared in the entire February. FIIs continue to distance themselves from the Indian equity market despite improving trading relations between the United States (US) and India.
Meanwhile, rising global oil prices due to the war between the US, Israel, and Iran have badly battered the currencies of nations that rely heavily on oil imports to meet their energy needs.
The war in the Middle East seems unlikely to stop anytime soon, as US President Donald Trump has stated that it will continue for four to five weeks. Meanwhile, Iran has also denied reports signaling Tehran’s openness to discuss truce terms with Washington. “No message has been sent from Iran to the US, nor will any response be given to US messages,” an official from Tehran said, Tasnim reported. Additionally, Tehran has also threatened a prolonged war.
The New York Times (NYT) reported on Tuesday that operatives from Iran’s Ministry of Intelligence reached out indirectly to the US Central Intelligence Agency (CIA) with an offer to discuss terms for ending the conflict. The news led to a sharp correction in the US Dollar Index (DXY) after it posted a fresh three-month high at 99.68.
Meanwhile, the USD Index has regained ground after retracing to near 98.67 and is up 0.25% to near 99.00 at the press time.
In the US, improving US employment conditions and signs of accelerating factory-level inflation are expected to allow Federal Reserve (Fed) officials to hold interest rates at their current levels for a longer period. The ADP Employment Report showed on Wednesday that the US private sector created 63K fresh jobs in February, significantly higher than the 50K estimate and the prior reading of 11K.
Earlier this week, the US ISM Manufacturing PMI report showed that its sub-component Prices Paid, a key measure of factory-level inflation, soared to 70.5 in February against 59.5 estimates and the previous reading of 59.0.
For more cues on the current state of the US labor market, investors will focus on the Nonfarm Payrolls (NFP) data for February, which will be released on Friday.
Technical Analysis: USD/INR retraces from all-time highs around 92.70
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USD/INR corrects sharply to near 91.82 during the Asian trading session on Thursday. Still, the near-term tone remains bullish as spot holds above the rising 20-day Exponential Moving Average (EMA), which is near 91.36.
The 14-day Relative Strength Index (RSI) falls to near 62 after turning slightly overbought, indicating positive momentum has cooled but still favors dips being absorbed rather than an immediate trend reversal.
Initial support emerges at the 20-day EMA around 91.36, with a break exposing secondary support at 91.00 and then the prior reaction low near 90.60. On the topside, resistance is located at the March 4 high of 92.67.
(The technical analysis of this story was written with the help of an AI tool.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
- USD/CHF rises as the US Dollar strengthens on reduced expectations for Fed rate cuts.
- Strait of Hormuz disruptions lift energy prices, revive inflation fears, and curb Fed rate cut bets.
- SNB Vice-President Antoine Martin reaffirmed readiness to intervene against excessive CHF appreciation.
USD/CHF pares its recent losses from the previous session, trading around 0.7800 during the Asian hours on Thursday. The pair appreciates as the US Dollar (USD) gains ground, as the Iran conflict has entered its sixth day.
Iranian retaliatory strikes on energy infrastructure have disrupted critical Middle East Oil and gas flows, particularly through the Strait of Hormuz, driving energy prices higher and reviving inflation concerns. In turn, traders have scaled back expectations for Federal Reserve (Fed) rate cuts, lending support to the US Dollar.
Meanwhile, US and Israeli strikes across Iranian territory, alongside extensive Iranian missile and drone retaliation targeting regional sites and military facilities, have prolonged the conflict and amplified its broader impact.
Hostilities intensified further after a US submarine reportedly sank an Iranian warship off the coast of Sri Lanka. US Defense Secretary Pete Hegseth described it as the “first such attack on an enemy since World War II.”
However, the upside of the USD/CHF pair could be restrained as the Swiss Franc (CHF) strengthens on safe-haven demand amid heightened geopolitical tensions. Meanwhile, Swiss National Bank (SNB) Vice-President Antoine Martin reiterated the central bank’s readiness to intervene to prevent excessive CHF appreciation.
Swiss inflation held steady at 0.1% in February for a third straight month, defying expectations of a 0.1% decline. With price growth near the lower edge of the SNB’s 0–2% target range, policymakers remain cautious over lingering deflation risks.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
- EUR/JPY weakens to around 182.35 in Thursday’s early European session.
- The cross retains a mildly bullish bias above the key 100-day EMA.
- The first upside barrier emerges at 183.15; the initial support level is seen at 181.20.
The EUR/JPY cross loses traction to near 182.35 during the early European session on Thursday. The Japanese Yen (JPY) edges higher against the Euro (EUR) as rising geopolitical tensions in the Middle East drive investors toward safe-haven assets.
Furthermore, BoJ Governor Kazuo Ueda reaffirmed a commitment to a potential interest rate hike despite Middle East instability, though markets widely anticipate the Japanese central bank to stand pat at its March meeting.
The Eurozone Retail Sales will be the highlight later on Thursday. Economists expect a rise of 1.7% for the month of January. If the reports come in stronger than expected, this could lift the Euro against the JPY in the near term.
Technical Analysis:
In the daily chart, the broader setup of EUR/JPY retains a mildly bullish bias as price holds well above the rising 100-day exponential moving average, keeping the medium-term uptrend intact despite the pullback from recent highs around 185. The pair has slipped back into the upper half of its Bollinger structure after failing to extend above the upper band near 185.75, signalling easing upside momentum rather than a trend break. RSI around 44 shows momentum has cooled into neutral territory, consistent with a corrective phase within a still-positive underlying structure rather than outright bearish control.
Initial resistance emerges at the Bollinger middle band near 183.15, where the latest consolidation has stalled, followed by the recent swing high at 184.70 and then 185.70. A daily close back above 183.15 would ease immediate downside pressure and open a retest of 184.70. On the downside, immediate support stands at the 100-day EMA near 181.20. A break below this level would weaken the prevailing bullish bias and expose deeper support toward 179.80, where prior Bollinger lower-band interaction suggests stronger dip-buying interest.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
The Iranian government denied reports that it had sent a message to the United States (US) amid the ongoing conflict. Tehran declared that the armed forces had prepared for a long-term war instead of negotiating.
Iran's Tasnim news agency cites an Iranian official who said, “No message has been sent from Iran to the US, nor will any response be given to US messages. Iran's armed forces have prepared themselves for a long war.”
Market reaction
At the time of writing, the Gold price (XAU/USD) is trading 0.78% higher on the day to trade at $5,175. Meanwhile, the West Texas Intermediate (WTI) is up 2.60% on the day at $76.52.
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.
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