Dollar still a haven currency

dollar denominated assets that were there when the dollar took a plunge.
With the European debt crisis being topical this has left the euro-dollar currency pair swinging between gains and losses.
In this situation of high volatility and uncertainty on the markets politicians in Europe and the US are not the solution but the problem.
There has been a flight to quality and that quality is in the dollar as the currency rose after a congressional panel of six Democrats and six Republicans known as the super committee tried to reduce debt by US$1,2 trillion.
The dollar fell to US$1,3284 per euro and advanced to 76,63 yen from 76,55 yen.
The dollar gained against the pound trading at US$1,5496 from US$1,5537.
The dollar is up 6,5 percent in three months against nine peers, which include the Swiss franc.
The euro has been undermined by the region’s sovereign debt crisis while the Swiss franc and the yen have fallen as their governments bought billions of dollars to weaken their currencies.
The two central banks the Swiss National Bank and Bank of Japan blew up their balance sheets to intervene on the markets to curb any rallies in their currencies.
The yen has been trading in a flat line for the past two weeks. The yen strengthened against the euro to trade at 103,85 per euro.
As we head towards year-end the dollar has been regarded as the currency in which positions will contract.
The market will surely buy dollars in the short to medium term given the fundamentals surrounding the US market.
Risk-off is now the theme of trade as investors are now taking short positions in the euro and growth-related currencies like the Australian dollar, rand, New Zealand dollar among others.
The outlook for the euro is bad leaving traders with optional trades in the euro-dollar pair and Australian dollar and United States dollar pair all because of the risk-off atmosphere.
The yen is by far the most traded currency in Asia as we are seeing most Japanese companies calling back their offshore funds to buy growth in Asia.
In the past three months the debt crisis in Europe has taken centre stage dampening global risk sentiment.
The euro traded lower against the dollar on the backdrop that US lawmakers failed to agree on a debt reduction plan.
The euro was trading at US$1,3284 to the dollar and weakened against the pound to 85,76 pence per euro from 86,76.
The market is currently being driven by headlines than fundamentals as we see investors in Europe clamour for ECB to stem crisis.
Risk appetite is low pushing the Australian dollar and the New Zealand dollar to the downside.
The Aussie dollar was little changed against the dollar to trade at US98,58 cents and fell against the yen to 76,50.
The New Zealand dollar rose slightly to US75,25 cents from 74,23.
The deadlock in the US and Europe will definitely weigh on the Aussie and the New Zealand.
From the current situation we could see Aussie dollar reaching support levels of US96,30 cents.
African Markets
The South African rand further weakened against the dollar on US deadlock as debt reduction issues continue to weigh on riskier assets like the rand.
The rand declined to trade at 8,5268 per dollar as the austerity measures in the US and Europe continues to hurt demand for exports and slowdown in global growth.
In other African news the Egyptian stock market plunged by 4 percent on deep political crisis in the capital Cairo.
Egyptian foreign currency reserves have declined by 38 percent this year to US$22,1 billion as further tension in Cairo continue to hurt trade relations.
Commodity markets
Gold rose on US debt deadlock issues pushing demand for the metal as a safe haven as it rose to trade US$1 708,20 an ounce.
As gold swings between gains and losses there’s need to reduce exposure to losses by buying into a decline in gold, consider a non-correlated currency pair to gold USD/CHF to protect oneself from gold declines.
At the moment we are also seeing psychological support levels for gold at US$1 680 an ounce, i.e. short-term paying for long term.
As the Federal Reserve tries to loosen its monetary policy I urge traders to be bullish on gold as it is an inflationary hedge long-term.
Trendline for gold could test US$1 650 an ounce, these levels are buy signals for gold.
Gold positioning is key against fiat money hedge as central banks weigh the options of yield versus growth.