Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

FOREX-Egyptian unrest prompts flows to safer havens

Published 01/28/2011, 11:30 AM
Updated 01/28/2011, 11:32 AM

* Egyptian civil unrest prompts safe-haven buying

* Yen recovers after fall on demand from Japan exporters (Recasts, adds quotes, updates prices)

NEW YORK, Jan 28 (Reuters) - The dollar and Swiss franc rallied on Friday as events in Egypt prompted more investors to see the Middle East and North Africa destabilizing, increasing the demand for safer havens.

Dozens of people were wounded as police and demonstrators fought running street battles in Cairo in unprecedented protests against President Hosni Mubarak's three-decade rule. [ID:nLDE70Q2OZ]

Earlier this month, a popular revolt forced Tunisia's leader to flee the country. [ID:nLDE70Q2OZ]. Though on a much smaller scale, Saudi authorities detained dozens of demonstrators on Friday in Jidda who gathered to protest poor infrastructure after deadly floods swept through Saudi Arabia's second-biggest city. [ID:nLDE70R19L].

"There's some concern about the events in North Africa, especially in Egypt now," said Samarjit Shankar, managing director of global foreign exchange strategy at BNY Mellon in Boston. "I believe that's the primary catalyst here."

The dollar also got a boost from a report on U.S. gross domestic product [ID:nN27219246] [ID:nCLASCE79L], while the yen recovered from Thursday's sell-off, though investors were still cautious on what a downgrade of Japanese long-term debt may mean for other large developed-economy debtors.

The euro was last down 0.7 percent at $1.3633 on electronic trading platform EBS, nearly a cent and a half from the two-month high of $1.3760 hit on Thursday, on speculation of a euro zone interest rate rise. [ID:nLDE70Q1EY] It fell 1.1 percent against the Swiss franc.

The dollar lost 0.3 percent against the Swiss franc , while sterling fell 0.6 percent against the dollar . The Egyptian pound touched its weakest in at least six years versus the dollar

"If the Mubarak government falls, the next few days could see some heavy U.S. dollar and Swiss Franc safe-haven buying," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.

The Israeli shekel lost 1 percent against the dollar, though some investors blamed local conditions. The Israeli Finance Ministry said on Thursday it is seeking to annul a tax exemption for foreign investors on profits from short-term bond investments. [ID:nLDE70Q1HO]

The cost of insuring Middle East and North African debt against default rose sharply on Friday as investors worried about political stability in the region. [ID:nLDE70R0OH].

Fitch Ratings revised the rating outlook on the Arab Republic of Egypt to negative from stable. [ID:nWLA4008]

YEN GAINS

The yen gained as demand from Japanese exporters and speculators helped the currency to recoup some losses from a broad sell-off triggered the previous day by a cut to the country's credit rating.

The dollar lost 0.9 percent on the day to 82.18 yen on electronic trading platform EBS, pulling back from a rally to 83.22 yen on Thursday. Traders said a triggering of stop-loss orders around 82.50 yen led the dollar lower.

But analysts said the Standard and Poor's downgrade to AA- highlighted Japan's fiscal problems and could still hurt the yen.

In the 10 minutes between 7:50-8:00 GMT on Thursday, dollar/yen trading activity on the EBS trading platform was 5 times more active than the average one-hour period for the first three weeks of the year, EBS said.

"When we have significant news like Japan yesterday and a sell-off, we tend to see some recovery," said Kathy Lien, director of research at GFT Forex in New York. "The strength of the recovery is what is surprising. The theme today is risk aversion, and markets are nervous." (Additional reporting by Wanfeng Zhou in New York and Naomi Tajitsu in London) (Reporting by Nick Olivari; Editing by Dan Grebler)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.