Forex - Dollar Rises Amid Global Flight to Safety

The dollar strengthened against most of the world's major currencies on Wednesday on concerns the U.S. economy faces more lackluster growth and on fears of a rekindling European debt crisis, which sparked global flight to the safety of the dollar and out of equities markets worldwide.

The euro fell against the dollar in Asian trading Wednesday, with EUR/USD falling 0.08% and trading at 1.3071.

Last Friday's jobs report began to fade from memory on Wednesday, even if just a little.

On Friday, the U.S. government announced that March added only 120,000 nonfarm payrolls for that month, far below market expectations.

The numbers initially sent the dollar falling up release and for several days later on the concerns the Federal Reserve would roll out easing measures to spur more life into the economy and fuel more job creation.

Easing measures, liquidity injections into the financial system namely, weaken the dollar and send assets like gold climbing.

However, the Federal Reserve has remained largely silent on the issue, and even Fed Chairman Ben Bernanke made an speech in public without seriously addressing monetary policy and focused instead on calling on banks to be sure to have financial cushions to ensure financial stability.

He did say, however, that the recovery is far from over.

By early Wednesday in Asia, markets had turned their attention to Europe, where the debt crisis appears to be coming out of hibernation.

The yield on Spain’s 10-year government bonds rose to 5.9% from 5.8% earlier in Europe, sparking fears that the country will be the next in the eurozone in need of a bailout.

Yields continue to rise despite assurances from Spanish Prime Minister Mariano Rajoy that the country will cut its budget deficit to 3% of gross domestic product in 2013.

Investor sentiment is falling in the entire in eurozone as well.

Market research group Sentix said its index of investor confidence declined by 6.5 points to -14.7 in April from March’s reading of -8.2.

It was the first monthly decline after posting three months of gains.

The news sent investors snapping up dollar positions in a safety play and selling stocks and higher-yielding currencies.


The greenback, meanwhile, was up against the pound, with GBP/USD down 0.06% and trading at 1.5854.

The greenback was up against the yen, with USD/JPY trading up 0.10% at 80.76, and up against the Swiss franc, with USD/CHF trading up 0.09% at 0.9194.

The greenback was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.04% at 1.0049, AUD/USD down 0.09% at 1.0242 and NZD/USD down 0.09% at 0.8142.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.12% at 80.14.

Later Wednesday in the U.S., the government will release data on import prices, crude stockpiles as well as the federal budget balance.

The Federal Reserve will also to publish its Beige Book.