Goldman Sachs is the Latest Forex Crisis

By: Hillel Fuld
The low-yielding JPY achieved its strongest heights this month on Monday, gaining on higher-yielding currencies such as the
AUD as investor appetite was reduced on fears about broader results from charges against Goldman Sachs.

With data showing an increase in speculative long positions on the Aussie earlier in April, and in short positions on the JPY, Forex analysts said the market had probably been ripe for a correction in pro-risk trades after a run higher over the past few months.

The USD, also a low-yielder considered its  safe-haven status, increased its gains against the sterling, the EUR and the Aussie after the Australian currency staged its biggest nosedive since early February on Friday.

Goldman Sachs was charged with fraud by the U.S. Securities and Exchange Commission on Friday in the structuring and promotion of a debt product tied to subprime mortgages, rattling the entire financial world.

Germany and Britain will also seek details from the SEC as a prelude to potential legal actions, while the market is nervous of what this could mean for stricter regulation.

Traders said currencies traded against the USD and JPY felt heavy, with figures from the Commodity Futures Trading Commission showing speculative net long positions in the AUD at their highest in 3 years.

"What is there to reassure markets and provide that good news to turn around the negative risk environment? It's not clear that there's anything positive coming," said Robert Ryan, currency strategist at BNP Paribas in Singapore.