Search for Safety Shapes Forex Trade

[Joanne98]

TORONTO -- The dollar rose against the euro and fell modestly versus the yen, as safe-haven flows remained the dominant influence in currency markets early on Monday.

In an extension of the trading patterns of late last week, the euro and pound sterling are suffering the most, in light of concerns about the deterioration of the European banking sector.

Negative sentiment toward the single currency has also become more pronounced after Moody's Investors Service downgraded the long-term credit rating of Barclays. A report that there are fears of a default in currency swap lines among European banks only depressed the euro further.

These concerns have also contributed to broad declines for European and Asian equity markets Monday, accentuating the flight-to-safety theme that typically benefits the dollar and the yen, both of which are considered safe haven currencies.

"We've seen the reemergence of financial sector concerns, so as a result risk aversion has returned full-steam," said senior currency strategist Matthew Strauss of RBC Capital Markets in Toronto, terming Monday's activity so far as "follow-through" from last week's action.

Early Monday, the euro is at $1.2772, down from $1.2802 late Friday, and ¥113.95 from ¥115.07, according to EBS. The dollar is at ¥89.23, from ¥89.92, and is trading at $1.4109 versus pound sterling, from late Friday's $1.4514 level. Against the Swiss franc, the dollar is at 1.1650 Swiss francs from 1.1617 Swiss francs.

http://online.wsj.com/article/SB123358362984039261.html?mod=googlenews_wsj

The pound/sterling deathwatch is starting!