Publié le Fri, 23 Jan 2009 14:59:05 +0100

Safe-Haven U.S. Dollar Rises Sharply as Equity Markets Sell Off

Ahead of the North American equity market open, futures contracts on the Dow Jones industrial average are down 216 points to 7876 and contracts on the S&P 500 are down 24 to 801.

As such, the U.S. dollar, which during the financial crisis has typically risen during periods of heightened risk-averse sentiment, is making broad-based gains. The U.S. Dollar Index is up 1.219 points to 86.739. Meanwhile, the euro is down 0.0211 to 1.279 against the dollar. The EUR/USD's session low of 1.2766 is its lowest point since Dec. 8.

Elsewhere, the U.S. dollar is up 0.0058 to 1.2604 against the Canadian dollar, after the release of Canadian consumer price index data.

Canadian December headline inflation declined 0.7% month-over-month compared to expectations for a 0.4% contraction and previous 0.3% fall, yielding an annual inflation rate of 1.2% compared to expectations for a 1.3% level and previous 2.0% inflation rate. Core inflation fell 0.4% on the month in December compared to expectations for a 0.3% decline and previous 0.7% gain, while annual core inflation was in line and unchanged from the previous month's 2.4% rate.

Also contributing to the lower loonie are lower crude oil prices. West Texas Intermediate contracts are down $1.13 per barrel to $42.54. The loonie generally moves in the same direction as oil. In addition, the U.S. dollar is up 0.0287 to 1.5545 against the equally commodity-driven Australian dollar.

The U.S. dollar is up 0.0143 to 0.7349 against the pound sterling, after the UK officially entered into a recession, after the United Kingdom's fourth-quarter gross domestic product revealed the second consecutive quarter of negative economic growth. The pound is subsequently selling off against all major foreign currencies.

"Market themes today are much as they have been for the week - USD up, high yielders down and GBP under-performing everything. US stock futures are down heavily as are European markets, though there is no particular news-flow driving losses. With no important US macro news scheduled before the [Federal Open Market Committee] announcement next Tuesday, stocks will continue to be the main driver of USD direction," wrote RBC Capital markets global head of FX strategy Adam Cole.

The USD/GBP rose six cents this week after a plethora of weak economic out of the UK, including talk of nationalizing the Royal Bank of Scotland after it posted the largest annual loss in UK corporate history, causing the government to increase its stake in the firm

Meanwhile, the Japanese yen, another low-yielding currency, is posting broad-based gains and is higher against the U.S. dollar. The USD/JPY is conversely down 0.25 points to 88.66.

EUR/USD down 0.0211 to 1.279.

USD/JPY down 0.25 to 88.66

USD/GBP up 0.0143 to 0.7349.

USD/CAD up 0.0058 to 1.2604.

USD/AUD up 0.0287 to 1.5545.

All data taken at 8:31 a.m. EST.

By Ryan Szporer, rszporer@economicnews.ca, edited by Nancy Girgis, ngirgis@economicnews.ca

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