Forex News
- USD/CAD gains further to near 1.3900 amid fears of escalation in the Middle East war, prompting demand for safe-haven assets.
- Rallying oil prices have improved the appeal of the Canadian Dollar.
- Investors await the US NFP data for fresh cues on the US interest rate outlook.
The USD/CAD pair extends its winning streak for the sixth trading day on Monday, jumping to near 1.3900 in the Asian trade, the highest level seen in over two months. The Loonie pair trades firmly as fears of a fresh escalation in the Middle East war have further increased the safe-haven demand of the US Dollar (USD).
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.13% higher to near 100.35. S&P 500 futures trade 0.5% lower in the Asian trade, reflecting a risk-off market mood.
A report from the Wall Street Journal (WSJ) claiming the United States (US) Pentagon is sending 10,000 additional troops to Iran has prompted fears of widening Middle East conflicts. In response, Iran’s Brigadier General Ebrahim Zolfaqari has issued a stark warning on the Iranian state TV, saying that “US troops will be good food for sharks of the Persian Gulf”. Parliament speaker Mohammad Bagher Ghalibaf also said that Iran would "rain fire" on any US troops attempting to enter Iranian territory, BBC reported.
Investors brace for high volatility this week, as the US economic calendar shows a string of scheduled releases, notably the Nonfarm Payrolls (NFP) data, which would have a significant influence on the Federal Reserve’s (Fed) monetary policy outlook.
“We will remain attentive to risks on both sides of the mandate, and the labour demand has clearly softened,” Fed Chair Jerome Powell said in the press conference post the monetary policy announcement on March 18. Powell added, “Job creation is very low, and a zero-growth equilibrium carries downside risks.”
Theoretically, signs of a weakening job market encourage Fed officials to turn dovish on interest rates; however, they would be unlikely to do so this time, as higher oil prices due to the Middle East war have de-anchored inflation expectations.
Though investors have underpinned the US Dollar against the Canadian Dollar (CAD), the latter trades higher against its other peers, being a net oil exporter amid rising oil prices. WTI oil price has jumped almost 3% above $102.50 in the opening trade.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | 0.19% | -0.02% | 0.05% | 0.39% | 0.39% | 0.11% | |
| EUR | -0.16% | 0.01% | -0.15% | -0.09% | 0.27% | 0.23% | -0.06% | |
| GBP | -0.19% | -0.01% | -0.19% | -0.13% | 0.24% | 0.21% | -0.07% | |
| JPY | 0.02% | 0.15% | 0.19% | 0.05% | 0.41% | 0.38% | 0.11% | |
| CAD | -0.05% | 0.09% | 0.13% | -0.05% | 0.35% | 0.28% | 0.05% | |
| AUD | -0.39% | -0.27% | -0.24% | -0.41% | -0.35% | -0.03% | -0.27% | |
| NZD | -0.39% | -0.23% | -0.21% | -0.38% | -0.28% | 0.03% | -0.29% | |
| CHF | -0.11% | 0.06% | 0.07% | -0.11% | -0.05% | 0.27% | 0.29% |
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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
West Texas Intermediate (WTI) – the US oil benchmark – witnesses a fresh leg higher in early dealings on Monday, extending its winning streak into a fourth consecutive trading day.
The relentless surge in the black gold this Monday is mainly due to a potential threat to Red Sea shipping by Yemen’s Iran-sponsored militant group, Houthis.
Houthis launched their first attacks on Israel since the start of the conflict on Saturday, in a geographical expansion of the Middle East war, which began on February 28 after the US-Israel struck Iran.
The looming risks to global trade through the Red Sea combined with the existing blockage to the Strait of Hormuz, intensify concerns over energy supply disruptions, driving the oil price rally.
WTI tops $100 per barrel once again, looking for another attempt toward the three-year high of $113.28.
All eyes now remain on any further attacks by Houthis on Israel, a probable US ground military operation into Iran and peace talks between the US and Iran for fresh trading impetus in oil prices.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- The Pound Sterling trades weakly against the US Dollar at the start of the week amid weak demand for riskier assets.
- Iran releases fiery warning against potential US ground attacks.
- Investors await key US economic releases, notably the US NFP data.
The Pound Sterling (GBP) trades lower against the US Dollar (USD) at around 1.3240 in the opening trade at the start of the week, the lowest level seen in almost two weeks. The GBP/USD pair faces selling pressure as fears of a potential United States (US) ground invasion in Iran have weighed on demand for riskier assets.
During the press time, S&P 500 futures are 0.5% down, reflecting a dismal market sentiment. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its winning streak for the fifth trading day on Monday, rising to near 100.35.
Late Thursday, a Wall Street Journal (WSJ) report showed that the US Pentagon is considering sending 10,000 additional troops to Iran. In response, Iran’s Brigadier General Ebrahim Zolfaqari has issued a stark warning on the Iranian state TV, saying that “US troops will be good food for sharks of the Persian Gulf”.
Fear of further widening of Middle East conflicts prompts risks of persistently higher oil prices, a scenario that is unfavorable for currencies from economies, such as the United Kingdom (UK), that rely heavily on oil imports to meet their energy needs.
On the macro front, major triggers for the GBP/USD pair will be key US economic data releases this week, which include various labor market-linked indicators, especially the Nonfarm Payrolls, and the ISM Purchasing Managers’ Index (PMI) data, which will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.
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.
European Central Bank (ECB) Governing Council (GC) member and Bank of France Governor, François Villeroy de Galhau made some comments on the monetary policy in his speech early Monday.
Key quotes
Policymakers are ready to act if energy-driven inflation broadens.
Emphasises it is too early to discuss timing of any rate hike despite rising market expectations.
Iran war-driven energy shock is seen as inflationary near term, but ECB cannot prevent the initial spike.
Policy focus is on second-round effects, not the first-round energy price surge.
Market reaction
EUR/USD is failing to find any inspiration from these hawkish comments, losing 0.14% on the day to trade at 1.1492, as of writing.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
In its latest post on X, the Israel Defense Forces (IDF). the nation’s military, said that “in the past hour, the Air Force intercepted two unmanned aerial vehicles launched from Yemen.”
This comes after Yemen’s Iran-backed Houthis entered the Middle East war for the first time on Saturday, firing a salvo of ballistic missiles on Israel. They also warned that the attacks would continue until aggression ceased on “all fronts”, indicating against Iran and its proxies such as Hezbollah.
Market reaction
The US Dollar Index (DXY) is closing in on 100.50 following these Middle East headlines, while Oil prices jump at the weekly open.
- EUR/USD falls further to near 1.1490 as dismal market sentiment weakens risky currencies.
- Iran’s stark warning against a potential US ground attack dampens market mood.
- Investors await the flash German HICP data for fresh cues on the ECB’s monetary policy outlook.
The EUR/USD pair extends its losing streak for the fifth trading day on Monday, trading 0.15% lower to near 1.1490 during the early Asian trading session. The major currency pair is under pressure as the market sentiment turns risk-averse due to fiery warnings from Iran’s Brigadier General Ebrahim Zolfaqari, on the Iranian state TV, that United States (US) ground troops will be “good food for the sharks of the Persian Gulf”.
At the press time, S&P 500 futures trade 0.5% lower, indicating a weak risk appetite of investors towards risky assets. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near 100.35.
Late Thursday, a report from the Wall Street Journal (WSJ) showed that the US Pentagon is planning to send an additional 10,000 troops to Iran despite President Donald Trump’s claims of negotiation talks with Tehran.
On the macro front, investors await the preliminary German Harmonized Index of Consumer Prices (HICP) data for March, which will be published at 12:00 GMT. Investors will pay close attention to the inflation data as it will influence market expectations for the European Central Bank’s (ECB) monetary policy outlook. The impact of the inflation data will be significant on the Eurozone’s interest rate expectations, as it will reflect the impact of higher energy prices due to Middle East conflicts.
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.
- The Japanese Yen extends previous declines at the weekly open on Monday.
- The US Dollar stands tall on risk aversion as the Middle East war expands.
- All eyes remain on a potential threat to Red Sea as Yemeni Houthis enter war.
The Japanese Yen (JPY) continues to remain at the receiving when compared to the US Dollar (USD) as a new week begins in Asia on Monday.
The Middle East conflict enters its fifth week, with no signs of a negotiated truce. Instead, the war expanded geographically in the Gulf after Iran-back militant group in Yemen, Houthis, entered the war, striking Israel over the weekend.
Israel reported early Monday that they intercepted two drones fired from Yemen. The US Dollar (USD) stands tall as risk-aversion remains at full steam, bolstering its appeal as a safe-haven and also as the world’s reserve currency.
Markets fret that a potential Houthi threat to Red Sea shipping could further damage global economy.
The unabated haven demand for the Greenback continues to undermine the Japanese Yen, sending the USD/JPY pair to the highest level since July 2024, near 160.50.
Looking ahead, the further upside in the pair appears limited as the JPY could draw some support from looming Japanese forex intervention risks. Additionally, hopes that the Bank of Japan (BoJ) could hike interest rates in the upcoming meeting could check the par’s upside.
The immediate focus is now on the BoJ’s Summary of Opinions of the March meeting.
Japanese Yen Price Last 7 Days
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies last 7 days. Japanese Yen was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.85% | 1.45% | 1.67% | 1.17% | 3.42% | 2.50% | 1.49% | |
| EUR | -0.85% | 0.59% | 0.87% | 0.31% | 2.56% | 1.63% | 0.64% | |
| GBP | -1.45% | -0.59% | 0.36% | -0.28% | 1.96% | 1.03% | 0.06% | |
| JPY | -1.67% | -0.87% | -0.36% | -0.52% | 1.68% | 0.75% | -0.22% | |
| CAD | -1.17% | -0.31% | 0.28% | 0.52% | 2.28% | 1.35% | 0.33% | |
| AUD | -3.42% | -2.56% | -1.96% | -1.68% | -2.28% | -0.90% | -1.88% | |
| NZD | -2.50% | -1.63% | -1.03% | -0.75% | -1.35% | 0.90% | -0.97% | |
| CHF | -1.49% | -0.64% | -0.06% | 0.22% | -0.33% | 1.88% | 0.97% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
- Australian Dollar faces selling pressure at the start of the week amid risk-off market sentiment.
- Iran releases a stark warning against the US plans of ground invasion.
- This week, investors will focus on key US labor market-related economic releases.
The Australian Dollar (AUD) trades lower against its major currency peers at the start of the week, trading 0.27% lower to near 0.6850 against the US Dollar (USD) in the opening trade. The antipodeans face selling pressure as investors worry that conflicts in the Middle East are set to widen amid fears that the United States (US) will send troops for ground military action in Iran.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.17% | 0.17% | 0.06% | 0.04% | 0.38% | 0.33% | 0.12% | |
| EUR | -0.17% | -0.01% | -0.07% | -0.13% | 0.26% | 0.16% | -0.06% | |
| GBP | -0.17% | 0.00% | 0.00% | -0.12% | 0.25% | 0.17% | -0.05% | |
| JPY | -0.06% | 0.07% | 0.00% | -0.03% | 0.32% | 0.24% | 0.03% | |
| CAD | -0.04% | 0.13% | 0.12% | 0.03% | 0.35% | 0.23% | 0.06% | |
| AUD | -0.38% | -0.26% | -0.25% | -0.32% | -0.35% | -0.08% | -0.28% | |
| NZD | -0.33% | -0.16% | -0.17% | -0.24% | -0.23% | 0.08% | -0.22% | |
| CHF | -0.12% | 0.06% | 0.05% | -0.03% | -0.06% | 0.28% | 0.22% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Last week, a report from the Wall Street Journal (WSJ) showed that the US Pentagon is planning to send up to 10,000 additional ground troops in Iran, at times when President Donald Trump has announced a 10-day postponement of planned military action on Iran’s power plants in an attempt to de-escalate conflicts.
In response, Iran’s Brigadier General Ebrahim Zolfaqari has issued a stark warning on the Iranian state TV against US attempts of ground invasion, saying that “US troops will be good food for sharks of the Persian Gulf”.
As of writing, weakness in S&P 500 futures, being down 0.55% at the start of the week, reflects cautious market sentiment. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near 100.35.
On the macro front, investors will focus on key US employment releases this week, which will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.
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.
Here’s a brief recap of important developments that occurred over the weekend as the Middle East war enters its fifth week, with no signs of any truce.
- Iran-backed militant group in Yemen, Houthis, entered the month-old war in the Middle East on Saturday, claiming two missile launches at Israel.
- The Houthis' entry could further hurt global shipping if they again target vessels in the Bab el-Mandeb Strait off the Red Sea, through which about 12% of the world's trade typically passes.
- Israel’s Prime Minister Benjamin Netanyahu announced an expansion of Israel’s invasion of southern Lebanon as his forces target Hezbollah.
- Islamabad, Pakistan, hosted diplomatic talks between the foreign ministers of Egypt, Turkey and Saudi Arabia on Sunday.
- Pakistani Foreign Minister Ishaq Dar said that “Pakistan is very happy that both Iran and the US have expressed their confidence in Pakistan’s facilitation” of the talks, which he said will happen in the “coming days”.
- The Israeli military continued carrying out extensive strikes on what it called targets belonging to the Iranian regime across Tehran.
- Iran’s Energy Minister confirmed Israeli attacks on “electricity infrastructure” in Tehran, the wider Tehran Province and Alborz Province, which caused power outages.
- The International Atomic Energy Agency (IAEA) confirmed that Iran’s heavy-water production plant is no longer operational at Khondab, which Israel attacked on 27 March.
- Citing US officials, the Washington Post reported that the Pentagon is preparing for weeks of limited ground operations in Iran, potentially including raids on Kharg Island and coastal sites near the Strait of Hormuz.
- Iran’s parliament speaker Mohammad Bagher Ghalibaf said Iranian forces “are waiting for the arrival of American troops on the ground to set them on fire”.
- The US dispatched thousands of Marines to the Middle East in the month-old war. The first of two contingents arrived on Friday on an amphibious assault ship, the US military said on Saturday.
- The US is allowing a Russian crude tanker to reach Cuba, marking a targeted easing of its de facto oil blockade, per The New York Times.
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.
DBS Group Research economist Chua Han Teng highlights that Thailand’s financial markets, particularly the Thai Baht (THB) and equities, are under pressure due to vulnerability to Middle East conflict-related commodity shocks. The report notes that upside inflation risks from the Iran war have likely closed room for further Bank of Thailand (BoT) easing, with markets pricing an unchanged policy rate for at least six months.
Baht under pressure as policy constrained
"Thailand’s financial markets remain under pressure, with the Thai baht (-5.3%) the worst-performing currency in the ASEAN-6 region month-to-date, while the benchmark equity index also lost ground (-5.8%). The underperformance reflects the economy’s high vulnerability to severe commodity disruptions propagating from the Middle East conflict. Downward pressures on financial markets are unlikely to ease meaningfully without a credible geopolitical de-escalation."
"The resulting stagflationary effects of Middle East tensions on Thailand’s economy pose a policy dilemma for the Bank of Thailand (BoT). Like its global peers, the BoT is assessing the duration and severity of the supply shock stemming from the Iran war, which remains highly uncertain. Upside inflation risks have likely closed the room for further monetary easing to support a lagging economy and weak credit conditions."
"Considering that the BoT just cut its policy rate to 1.00% in February, we think it is unlikely to reverse course in the near term, instead choosing to monitor whether price pressures broaden beyond energy and fertiliser price shocks, leading to higher inflation expectations and second-round effects."
"Thai fixed income markets are pricing in an unchanged policy rate for at least the next six months, but sustained elevated commodity prices driven by a prolonged Iran war would raise the market’s expectations of a potential BoT rate hike."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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