FX round-up: IMF warning shot triggers safe haven interest
Wed 10 Oct 2012
LONDON (SHARECAST) - The dollar rapidly gained traction against most major currencies on Tuesday after the International Monetary Fund's warning that the global recovery is stalling.
The IMF said that the risk of further deterioration in the economic outlook was "considerable" as it cut its 2012 forecast for global growth to 3.3% from 3.5% in July. It also reduced its 2013 forecast to 3.6% from 3.9%.
The warning sent alarm bells ringing across global markets and boosted demand for the safe haven qualities of the greenback.
The ICE dollar index, which measures the US currency against a basket of six other currencies, rose to 79.974 from 79.596 the previous session.
The safe haven yen was also sought after the IMF warning shot. Against the yen, the dollar changed hands at ¥78.28 from ¥78.31 on Monday. The euro fell to ¥100.65 after hitting a two-week high on Friday.
The single currency dropped to $1.2879 from $1.2974 amid persistent uncertainty about Greece and Spain and as nerves set in ahead of the third quarter earnings season.
European Central Bank chief Mario Draghi sparked nerves about Greece after he said the country had made progress in economic reforms but still has more to do.
Sterling declined to a one-month low against the dollar as disappointing UK manufacturing data spooked investors. The euro fell 0.6% against the pound at 80.47p.