The euro tumbled across the board due to risk aversion influenced by a very poor German bund auction. The Bank of Greece said around the same time as the auction results that the country risked a disorderly exit from the euro zone, providing an additional reason to sell the single currency. Also earlier in the day reports of Dexia bank collapsing and France having to bear the brunt would hurt the country’s AAA rating. Meanwhile a series of poor euro zone data on manufacturing and industrial orders indicate deteriorating economic conditions. Adding to global recession concerns was the disappointing China November HSBC flash PMI which fell to a 32-month low signalling contraction in growth. EURUSD fell to a seven-week low of 1.3371 to lose 1.2 percent on the day so far.
Sterling fell to a six-week low against the dollar on broad risk aversion in markets today after a series of negative news from Europe. Cable mainly took direction from the EURUSD though was given a brief relief rally after the Bank of England policy meeting minutes. All nine MPC members voted in the last meeting against increasing monetary stimulus further despite the worsening euro crisis. The BoE is wary of printing more money and now is not the time for more easing but it might well become warranted in due course. This will keep investors on edge. GBPUSD fell to 1.5553 from the London session high of 1.5632.
The Australian dollar is the biggest loser against the US dollar today, falling 1.5 percent on the day so far due to risk aversion. The commodity-price sensitive aussie tumbled earlier in the Asian session in reaction to poor China manufacturing data. This is negative for Australia too since China is a major export partner. Falling commodity prices dragged down the AUDUSD pair to a seven-week low of 0.9705.
The damp risk sentiment helped boost the US dollar which is perceived as a safe haven since it is very liquid and is used as a global reserve currency. The greenback gained against the Canadian dollar which was weakened due to falling crude oil prices. Canada is a major oil exporter. USDCAD rose to seven-week high of 1.0453 in European trading from the Asian open of 1.0375. Since the end of October the Canadian dollar has weakened 5.7 percent against the US dollar.
Dollar gained against the yen as the Japan holiday resulted in light trading. USDJPY rose to 77.22 from 77.02. EURJPY is down 0.8 percent on the day falling to 103.25.