Risk Appetite Produces Forex Opportunities
Risk appetite is back w
ith all the forex opportunity that a return to risk taking brings. The Yen fell against the dollar and other major currencies as US regulators announced plans to inject new capital into the US banking system and dismal economic data continues to come out of Japan.
Weaker Yen
Richard Franulovich of Westpac Banking Corp. stated, “There is an improvement in risk appetite today, and that’s filtered though in terms of dollar strength versus the yen. The yen is weaker off the back of improved sentiment on banking stocks and the potential for some government involvement.”
Forex brokers sought out higher yielding currencies and the Forex opportunity they provide investors.
Eastern European Central Banks Pledge Cooperation
The Polish zloty, Hungarian forint and Czech koruna rose against the troubled Euro as central banks in Eastern Europe promised to coordinate efforts to support their currencies. The Polish Zloty gained 4% against the Euro and investors were quick to take advantage of the forex opportunity this move offered investors. Polish central bank governor Slawomir Skrzypek stated that “an intensification of information exchange and coordination of action”
will assist regional Central Banks to support their respective currencies. The retreat from safe haven currencies is expected to boost Forex opportunities for several emerging currencies.
Return to Risk Aversion Predicted
Some forex brokers predict a return of risk aversion. Paresh Upadhyaya, senior vice president at Putnam Investments stated, “The dollar-yen seems to be following the yield spread. The recent yen weakness isn’t the start of a new trend. The yen is likely to strengthen in the second quarter because of continued uncertainty and risk aversion.”
The Euro fell after ECB President Jean-Claude Trichet stated that credit flows in the Euro Zone are declining.
While this latest return to risk appetite will probably be short lived savvy forex brokers will be quick to spot and take advantage of any Forex opportunities that present themselves. Hopefully future economic data will point to a recovery from the global recession.
