It’s been a wild couple of days in the financial markets, with risk appetite returning to some extent and riskier assets favored. Now, though, risk appetite is fading and the US dollar is gaining ground against other majors as disappointing news from China spurs the search for a safe haven.
The US dollar index is on the rise again, heading higher as risk aversion rises. Chinese growth appears to be slowing, and that is dashing the hopes of those who expected China to lead a global economic recovery. With Chinese growth slowing, there are concerns that the global economy will remain in the doldrums for quite a while. Chinese growth slowed to 8.1% in the first quarter, down from the 8.9% increase seen at the same time last year.
The result is that concerns are leading Forex traders to favor the US dollar for its safety and stability. The China news has dashed enthusiastic hopes, as well as brought many back to some of the other realities of the financial markets — including the ongoing sovereign debt crisis in Europe. There are concerns about Spain, and there are still worries about contagion.
At 13:26 GMT the dollar index is up to 79.571 from the open at 79.349. EUR/USD is down to 1.3128 from the open at 1.3187. GBP/USD is down to 1.5936 from the open at 1.5960. USD/JPY is up to 81.0370 from the open at 90.9000.
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