London: The dollar and yen rose broadly on Thursday as falling share prices sapped demand for risky investments, while the euro fell as dismal German economic data kept concerns intact about the deteriorating euro zone economy.
The dollar gained versus higher-yielding currencies as ongoing worries about the global economy stung oil prices and pushed commodity currencies like the Australian and New Zealand dollars lower.
This helped dollar to recover some losses suffered in the previous session due to a disastrous reading of US employment, but the it fell against the yen, which benefited from risk aversion as European shares fell 0.8% in early trade.
Sterling fell against dollar ahead of a rate announcement by the Bank of England due at 1200 GMT. The central bank is expected to slash interest rates by 50 basis points or more from 2.0% in an attempt to buffer the UK economy from a deep recession.
“The ADP jobs number was poor to say the least, but the dollar has generally put in a stronger performance on the back of the undertone of risk aversion,” said Phyllis Papadavid, currency strategist at Societe Generale in London.
“Oil prices continue to go lower, so it’s not a very good environment for commodity currencies,” she added.
Bu 0900 GMT, the euro had fallen 0.7% to a session low of $1.3536 according to Reuters data, edging towards a three-week low around $1.33 hit earlier in the week.
Selling in the euro picked up following figures showing an unprecedented 10.6% month-on-month fall in German exports in November as global demand for cars and other manufactured products have fallen due to a global recession.
The dollar rose 0.5%against a currency basket to 82.550, and rallied roughly 2% against the Australian dollar to $0.6966.
The Aussie sold off after a hefty fall in Australian building and trade data reinforced the case for more rate cuts in the country.
Investors have favoured the yen against the dollar as well as other currencies following figures on Wednesday showing a 693,000 US jobs cut in December, which continued to hit home the view the US economy is deteriorating, which will batter the wider global economy.
This has decreased demand for risky investments, prompting investors to continue unwinding risky yen carry trades, which involved using the low-yielding yen to pick up assets in higher-yielding ones.
High risk aversion was also reflected in the bond market, which rallied despite damp demand for new issuance around the world, and pushed the two-year euro zone government bond yield to its lowest since the early 1970s, according to market participants.