By FX Empire.com
The pair advanced for the second day as risk aversion in markets boosted demand on the dollar as a safe haven amid speculations the Swiss National Bank will intervene to halt the franc’s appreciation.
The dollar rose to one-month high versus the franc as the tensions stemming from the euro area triggered safety demand on the dollar, noting that interventions from the SNB and BoJ made the greenback the most attractive refuge.
After the rise in Italian bonds to rose once again above 7% which is seen unaffordable at the time of debt maturity. The rise reflects the mounting concerns as the contagion spread from Greece to Italy. Likewise, Spanish auction on short-term debt showed a remarkable rise in interest rates where the 1-year notes climbed to 5%, the highest since 1997, compared with last month’s rate of 3.6% while the 18-month bills jumped to 5.2% from the prior 3.8%. The French yields also witnessed an incline, adding to concerns the debt inferno is spreading to large euro area nations, noting that France has the highest exposure to Greek as well as Italian debt.
Thus, the political changes in Italy and Greece managed to calm down markets temporarily as tensions escalated once again.
In addition, fundamentals from the euro area showed a stall in growth at 0.2% in the third quarter and drop in German investor confidence to three-year low, increasing speculations the euro area will relapse into another recession.
Furthermore, expectations increased the SNB will strengthen its intervention to raise the franc cap against the euro to 1.25 instead of the current 1.20 on predicted devaluation in the euro amidst the ongoing tensions in the euro region.
On the other hand, the improvement seen in U.S. retail sales and empire manufacturing could not improve the jittery sentiment.
On Wednesday, U.S. MBA mortgage applications for Nov. 11 will be available at 11:00 GMT. As of 13:30 GMT, CPI for the year ended Oct. is estimated to retreat to 3.6% from 3.9%. Thereafter, net long-term TIC flows and industrial production will be due at 14:00 GMT and 14:15 GMT respectively.
The data is not expected to affect the pair’s movements as the main focus remains on the latest developments from the 17 nations using the common currency.
Originally posted here
