Currencies Unaffected by World Tension - But Caution Advised

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Includes: BZF, CYB, DBV, FXA, FXB, FXC, FXE, FXF, FXM, FXS, FXY, UDN
by: MyPlanIQ

We track ETFs to monitor the trend for bellweather currencies. In the light of continued and growing unrest in North Africa, we would have anticipated the continued flight to safe currencies, with others under downward pressure -- but we do not see that trend emerging.

All currencies, with the exception of Japan, are moving upward. It is true that the top three are also considered safe haven currencies, but we would have expected to see the Swiss Franc have the biggest jump if it were a move to safety trend; we don't see that. This may signal that while there is an expectation that oil prices may rise and cause some short term turbulence, there is less concern that this will have any lasting impact on the economy.

Assets Class Symbols 03/02
Trend
Score
02/23
Trend
Score
Direction
Swedish Krona FXS 8.52% 7.89% ^
Swiss Franc FXF 7.26% 7.18% ^
Australia Dollar FXA 7.23% 6.42% ^
Canadian Dollar FXC 4.42% 3.29% ^
British Pound FXB 3.87% 3.02% ^
Mexican Peso FXM 3.72% 2.56% ^
US Dollar Bearish UDN 3.67% 3.34% ^
Euro FXE 3.22% 2.96% ^
Japanese Yen FXY 2.65% 2.73% v
G10 Carry Trade DBV 2.41% 1.76% ^
Chinese Yuan CYB 0.54% 0.49% ^
Brazilian Real BZF -0.5% -1.35% ^
Click to enlarge
The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

[Click all to enlarge]

The krona continues to lead the table as the economy continues to deliver impressive results. There remains little concern about the currency appreciating and that hurting exports.

The Swiss central bank has issued comments indicating that it will keep a firm grip on inflation and that interest rate rises will be used as it believes the low rates in other euro zone nations are not sustainable.

The Aussie dollar also climbed sharply despite mixed news between rising commodity prices and less than expected building permits indicating softness in their construction industry.

The Brazilian real moved into positive territory as the central bank raised interest rates again. With already high interest rates, the government is trying to avoid overheating the economy even as its currency is making exports more expensive.

The yuan is little changed as the country's leaders gather for the National People's Congress, which begins Saturday. There are signs that the government may be getting serious about allowing the currency to appreciate, but that will have to wait until the session is over.

The G10 Carry Trade Currencies highlight the reduction in concern about the current strife in North Africa in the Middle East, but there should be some concern that if this does spread, there may be greater impact on the world economy.

It's hard to throw off the old expectations that currencies will be under pressure during times of world tension; while most of the currencies are moving up, there is reason to be cautious and see if there is a correction next week.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.