FX round-up: Yen strengthens on spike in risk aversion

Foreign exchange markets were not exempted from the wave of risk aversion which swept over global financial markets as Chinese authorities moved to tackle some of the froth which had been accumulating in the country's capital markets.

Beijing moved to limit local governments’ access to opaque financing vehicles, as concerns grew in parallel surrounding a sharp increase in margin trading in Chinese equities.

The dollar/yen promptly backpedalled 1.13% to hit 119.35.

Contributing to the 'risk-off' attitude was the news that Greek authorities have brought forward the scheduled date for the country’s presidential elections. That sent yields on the country’s debt rocketing, despite some economists arguing that the threat posed to the wider Eurozone was limited.

Nevertheless, it should be noted that, despite the strong gains in the prices of many financial assets year-to-date, investors' asset allocation revealed a deep-seated skepticism about growth prospects going forward, even Stateside - with defensive stocks having clocked in with the best performances so far this year.

The euro/dollar finished 0.60% higher at 1.2388.

Lastly, by the end of trading cable was to be seen up by 0.22% to 1.5684. In the afternoon MPC member Martin Weale argued that continued low growth in labour productivity might place upwards pressure on interest rates in the short-term.