The US Dollar Falls As Traders Move To Risk Off Mode

The US dollar dipped from recent highs over the last two days, to trade at 92.17 falling 7 points in the Asian session. The sharp declines in oil are weighing on global sentiment as speculators move to safe havens. Gold soared on Monday to trade over $1230.  The significant drops in oil prices are upsetting global markets. Oil fell to new lows this morning.  Brent crude was at $47.24 a barrel on the London-based exchange after dropping as much as 5.9 percent to $47.16, the lowest since March 2009.

The euro is benefiting from the greenback’s decline to trade at 1.1843. ECB President Mario Draghi has said policy makers are making “technical preparations” to combat deflation, raising speculation he is preparing a bond-buying program similar to Japan’s to pump money into the economy. Rumors are flying that the ECB will be unable to raise the money needed for a full blown QE program.

The Bank of Japan’s purchases of as much as 12 trillion yen ($102 billion) a month is about equivalent to what the government issues in coupon-bearing securities. This morning’s Japanese current account release showed the weak yen was the main reason for Japanese corporations to have earnings growth for the last fiscal year, so Japanese shares are mainly dragged down by exporters today on the strong yen.  Japan posted a current account surplus for the fifth consecutive month in November as a weaker yen helped boost repatriated returns on foreign investment, official data showed Tuesday.

Japan logged a surplus of 433 billion yen in the current account, reversing a deficit of 596.9 billion yen a year earlier, the finance ministry said. The current account is the broadest measure of the country’s trade with the rest of the world, measuring not only trade in goods but also services, tourism and returns on foreign investment. The JPY climbed to 118.18 against the US dollar and kept pace with the euro at 139.95.

In other economic news this morning China released its monthly trade numbers.  The Australian dollar lifted on the news, hitting 0.8189. China imported 86.85 million tonnes of iron ore in December and 932.5 million tonnes for the full year, both record-high volumes for the month and year respectively, according to General Administration of Customs data. Imports for December rose 18.3 per cent from a year earlier and 29 per cent from November. The volume for the full year was a 13.8 per cent rise from 2013, customs said. According to official data, China’s trade surplus narrowed to $49.61 billion in December from $54.47bn in November. Analysts surveyed by Bloomberg had expected the trade balance to come in at a surplus of $US49 billion. The kiwi remained flat showing no reaction to the data this morning as the global fall of commodity prices and the drop in the US dollar balanced market views. The kiwi is trading at 0.7783.