FX GLOBAL CALL: Our Take on the Day's Big FX News
The FX Global Call covers the main news events affecting foreign-exchange markets in Asian and European trading hours, as selected by DJ FX Trader editors in New York, London and Singapore, as well as other hot spots when warranted.</br></br>1. Risk-off is the word(s) of the day, with investors selling stocks, emerging-market currencies, Italian bonds and more. A familiar hierarchy of safe havens is returning to the market, with the euro, Australian dollar and U.K. pound falling against the dollar, while the dollar sinks against the yen and Swiss franc. The selling started in Asia, but weak economic data out of the euro zone didn't help lift the mood.</br></br>2. Emerging-market currencies are getting hit hardest, with the South African rand pushing further above 10 to the dollar and the Turkish lira sinking to 17-month lows. Investors have two reasons to sell today, as they worry that the U.S. recovery will lead to the Fed shutting down easing, and that slower growth elsewhere will weaken the finances of emerging economies. Steep losses in May could be just the beginning, with the plunging rand offering clues of what's to come, says Societe Generale's Kit Juckes. "As Fed policy reaches the mildest of turning points, emerging market assets are vulnerable across the board, the rand being the first of what I suspect will be a series of dominoes to fall over," he said.</br></br>3. Even the yuan is falling, with many investors seeing reduced growth in China as the source of emerging markets' woes. While the government once again nudged its official exchange rate higher, investors are opting to push it lower. The yuan traded Friday at 6.1345 per dollar, from 6.1309 on Thursday, while the government fixed it at 6.1796, from 6.1820.</br></br>4. Coming up in the U.S.: