Safe Haven Demand Boosts Dollar Inflows

The safe haven U.S. Dollar was in heavy demand during Friday’s Asian trading session following the announcement that the Federal Reserve Ban is seriously considering putting a halt to its ultra loose policy by reining in some, if not all, of its asset purchase program. That announcement led to a major selloff in markets which focus primarily on emergent markets and those currencies which are commodity-linked, and a buy-in for safe haven currencies, primarily the U.S. Dollar but also to a lesser extent the Pound Sterling and Euro.

One Barclays Bank analyst said that emerging markets could see some significant challenges in the coming months given the expected normalization of the U.S. Federal Reserve monetary policy, a widening gap in growth between the developed economies and the emergent ones and softer prices in the commodity space.

The U.S. Dollar Index, viewed as the gauge of the greenback’s strength against its major peers, was trading at 81.693 .DXY, a gain of 1.4% on the week. As reported at 11:06 a.m. (JST) in Tokyo the EUR/USD pair was trading at $1.3236, slipping back from Wednesday’s peak of $1.3414. The AUD/USD pair dropped to a 3-year low at $0.9163 before recovering slightly to $0.9195 while the NZD/USD pair had traded at a 1-year low of $0.7710 before reversing and gaining back a few pips to settle at $0.7761.