Yen and Dollar Benefit from Increased Risk Aversion

The Dollar and Yen were the main beneficiaries from the increase in global risk aversion caused by Chinese news releases today. Fundamentally, China has made financial moves to restrict lending in an attempt to cool its stampeding economic growth.

Instructions were issued to a number of Chinese banks to raise their reserve requirements which could have the knock-on effect of slowing the entire global economic recovery.

The reality of Chinese banks making serious steps to restrict new loans has made the markets realise that China is extremely serious about slowing down its economy.

The EURUSD fell today as a result and currently posts 1.4070. Similarly, the EURYEN has experienced even larger declines and presently sits at 126.05.