USD Still Currency of Choice in Risk Averse Market

Any questions over the status of the USD as the currency of choice are being answered into the early week, with the greenback continuing to rally sharply on a broad based flight to safety. The latest price action has been largely attributed to the news that US auto giants GM and Chrysler have failed to secure restructuring funding from the US Auto Task Force and a warning that bankruptcy could be the best option.

ECB’s Wellink expressed concerns over the undercapitalization of banks and suggested that reserves need to be built up in good times so that banks can better deal with times of financial stress. The latest infusion of fear into the markets also has traders once again looking at the VIX with the volatility index jumping to trade back over 45% on Monday.

On the data front, Eurozone releases were much worse than expected with fresh multi-year lows in business climate and economic sentiment. Meanwhile in the UK, data was offsetting with stronger mortgage approvals and weaker Feb net consumer credit.