The demand for a haven sent the yen and the dollar up, while uncertainty in the UK and fears of a European recession sent the pound and euro plunging.
The yen rose as much as 0.5% immediately after news that former Japanese prime minister Shinzo Abe was shot today (July 8) in Nara. At 8.10am GMT, 133.81 yen to one dollar. “I think the yen is acting as its safe-haven,” said Bart Wakabayashi, branch manager at State Street in Tokyo.
According to this expert, investors in the market have an almost instinctive habit of buying USD and yen when there is bad news. In Japan, NHK has just announced that former Prime Minister Shinzo Abe has died at the age of 67 at a hospital in Kashihara city, Nara prefecture, where he received medical treatment.
On the other hand, the euro fell 3.2% against the dollar this week, as investors feared an energy crisis due to the uncertainty in gas supplies from Russia could send the continent into recession. .
The euro hit a new two-decade low with one euro to $1.007, before recovering to one euro to 1.01005. The euro’s drop helped lift the dollar index to a two-decade high.
“Rising EU gas prices and energy allocation signs in Germany suggest that risks exist to the eurozone economy,” said Jeremy Stretch, Head of G10 FX Strategy at CIBC.
The British pound also had a second consecutive week of decline. However, traders see this week’s 1.8% drop as relatively modest amid political turmoil with Prime Minister Boris Johnson’s resignation. The British pound fell 0.65% on July 8, with one pound for $1.1948.
While higher energy prices seem to take a toll on confidence and growth in Europe, investors are also worried about the US economy, despite the most recent better-than-expected data.
Economists estimate about 268,000 non-farm jobs in the US were added to the market last month. More jobs added may ease some recession worries, but will raise interest rates and strengthen the USD even more.
“Stronger job gains should underpin expectations of the Fed’s ever-stronger policy stance,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney.
The dollar also held high in emerging markets, sending several Asian currencies to multi-year lows this week. For example, the Indian rupee fell to a record low.