The dollar and the yen rose on Thursday as equity and commodity markets fell, encouraging investors to pare back exposure to risk and buy back the two low-yielders against perceived riskier currencies. The euro fell more than 1 percent against the yen while the higher-yielding commodity-linked Australian and New Zealand dollars slid as traders took profit from carry trades.
Analysts said some investors were already taking risk off the table heading into the year end, wary that the recent rally in risky assets may have been overdone and that economic data has not been as rosy as forecast. "Though it's hard to point to any specific factor today, there are some indications of a rise in risk aversion - stocks have come off and there are slight concerns that a lot of data recently has not been living up to expectations," Standard Bank currency analyst Steve Barrow said.
By 1231 GMT, the dollar index, a measure of its performance against a basket of six currencies, rose 0.4 percent to 75.524, after a 15-month low of 74.679 on Tuesday. The euro fell 0.7 percent against the dollar to $1.4848. It remained within the range of a large $1.48-$1.51 "double no touch" options structure expiring Friday.
The single currency also slid to a two-week low of 131.82 yen, as losses accelerated after breaking technical support at the 200-day moving average of around 132.00. The dollar fell 0.5 percent to 88.85 yen. The Australian dollar fell 1.4 percent to hit a two-week low of $0.9154, while the New Zealand dollar was the most underperforming currency, losing as much as 2.4 percent to hit lows of $0.7280 and 64.73 yen
"The focus is very much on risk sentiment because we don't have any major events on the agenda, plus the market is a little more sensitive going into the year-end, with people wanting to protect their positions," said Niels Christensen, currency strategist at Nordea in Copenhagen.
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