Market Overview

Euro On A High As Investors Pull Out Of Emerging Markets

Euro On A High As Investors Pull Out Of Emerging Markets
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The euro reached a new six month high overnight as anticipation of the release of the US Federal Reserve's policy meeting minutes caused investors to pile their money into less risky assets. The common currency traded at $1.3406 at 7:07 GMT on Wednesday morning just before the minutes were released.

Emerging markets have been especially hard hit by the Fed's decision to roll back its $85 billion per month stimulus spending, and stocks and currencies in those countries have taken a plunge. The Indian rupee has fallen to record lows along with the Indonesian rupiah and the Malaysian ringgit which are at four and three year lows respectively.

Related: Benzinga Market Primer for August 21: FOMC Minutes Continue to Drive Markets

Investors are hoping to find out more clues about the timing of the Fed's tapering plan from the meeting minutes to be released later in the day. Most are betting on September as a starting date for the Fed to begin trimming its stimulus spending.

The Wall Street Journal reported that the euro has benefited more than other currencies from worries about the Fed's tapering as investors are getting out of “carry trades”, in which they bought high yielding assets from emerging markets using low yielding currencies like the euro.

With the recent interest rate volatility, most are getting rid of emerging markets and pouring their money back into low yielding currencies. Due to the economic problems in the eurozone at the beginning of the year, the common currency was the popular choice to fund carry trades. Now, as investors reverse these trades, the euro has come out on top.

Posted-In: European Central BankNews Eurozone Commodities Forex Global Federal Reserve Markets Best of Benzinga


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