Dollar and Yen Gain on Banking Concerns

Forex traders noted that the US dollar and the Japanese Yen gained on Tuesday as concerns about the health of the financial sector sent forex traders and investors seeking the safe havens of the Yen and Dollar. Monday’s fall on Wall Street sent Asian markets down which benefited both the Dollar and Yen. Forex traders sought safe haven and pocketed profits from earlier trading of the Euro and high yielding currencies.

Reserve Bank of Australia Cuts Rates

The Australian dollar rose after the Reserve Bank of Australia cut rates by 25 basis points to a record low of 3.0%. Last week the Aussie dollar achieved a three month high against the dollar and a five month high against the Yen as Forex traders and investors took advantage of opportunities offered by the currency.

Buybacks For Dollar and Yen

The Aussie fell on Tuesday as warnings about the financial sector sent stocks down and bolstered the demand for US dollars and Yen. Mitsuru Sahara of Bank of Tokyo-Mitsubishi stated, “With the uptrend of the Aussie, market players were looking for chances to buy on the dips. So after the uncertainty factor got cleared away, they were comfortable buying back the currency. There is demand for the Aussie from those who want to bet on the economic recovery.”

BOJ Leaves Rates Unchanged

Forex traders noted the Bank of Japan’s decision to leave rates unchanged at 0.1%.The BOJ also revealed further steps to address the current credit crunch as Japan’s economy experiences the worse recession since the end of World War Two.

IMF Projects $4 Trillion in Toxic Debt

The health of the banking sector has long been a concern of forex traders and investors. The UK based Times said that the International Monetary Fund is suggesting that over $4 trillion in toxic debt has been racked up by banks and insurers. The report and other banking concerns have dampened risk sentiment for forex traders.

For now many forex traders are watching equity markets in advance of the long Easter holiday. Hopefully the performance of equity markets will signal a return to risk appetite.

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