The Eurozone euro and Japanese yen, along with currency-related exchange traded funds, are bouncing back as a spike in volatility pushed traders to safer corners of the market.
The CurrencyShares Japanese Yen Trust (NYSEArca: FXY) rose 0.7% Friday and broke back above its 200-day simple moving average. The CurrencyShares Euro Currency Trust (NYSEArca: FXE) was up 0.3%, inching toward its long-term trend line. The CurrencyShares Swiss Franc Trust (NYSEArca: FXF) was 0.5% higher.
The euro was up 0.4% late Friday to $1.0986 while the U.S. dollar dipped 0.7% against the yen to ¥120.74 and fell 0.5% against the franc to CHF0.9824.
The foreign currencies have bounced back in December, with FXY rising 1.4%, FXE increasing 3.3% and FXF advancing 4.0% so far this month.
Major foreign currencies were gaining against the greenback as weak data suggested that it was unlikely the Federal Reserve will further support monetary policy tightening beyond December’s anticipated rate hike due to global concerns, reports Dion Rabouin for Reuters.
“At this point, the market is shifting its focus off next week’s Fed rate hike, which has largely been baked in, and on to the path of normalization in 2016,” Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, told Reuters. “So these external macro factors could limit the scope of Fed hikes next year and that is weighing on the dollar.”
Moreover, traditional safe-haven currencies were appreciating on the heightened volatility in the U.S.
“When you have a selloff in risk, Europe tends to appreciate,” Steve Englander, director and global head of G10 FX strategy at Citigroup, told Reuters. “I think that’s why we’re seeing euro strength and European currency strength. But everything correlated with risk is selling off badly.”
CurrencyShares Japanese Yen Trust
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Max Chen contributed to this article.