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23 Apr 2013
Forex Flash: Risk on Risk off becoming less relevent in today´s financial markets - DBS Group
FXstreet.com (Barcelona) - DBS Group analysts note that at the start of the year, there was a view that the world had passed the mid-way point of the 2008 financial crisis.
They note that the loss of Yen and as safe haven currency was cited as one reason, and the recent collapse of Gold prices also gave rise to belief that gold may have lost its value as a hedge against fiat currency. Meanwhile, in the place that the crisis started, US equities have risen to a new record high amidst a recovery in its housing sector. They feel that this goes some way to explain why “risk on,risk off” became less and less relevant in financial markets this year. They write, “Each market has been increasingly moving with its own fundamentals and domestic monetary/fiscal/exchange rate policies.” They see that relative value became more important in driving exchange rates against each other. To some extent, they note that this looser correlation between markets also reflected the G20 nations’ unwillingness to fully cooperate (like in early 2009) in coordinating policies to boost global growth.
They note that the loss of Yen and as safe haven currency was cited as one reason, and the recent collapse of Gold prices also gave rise to belief that gold may have lost its value as a hedge against fiat currency. Meanwhile, in the place that the crisis started, US equities have risen to a new record high amidst a recovery in its housing sector. They feel that this goes some way to explain why “risk on,risk off” became less and less relevant in financial markets this year. They write, “Each market has been increasingly moving with its own fundamentals and domestic monetary/fiscal/exchange rate policies.” They see that relative value became more important in driving exchange rates against each other. To some extent, they note that this looser correlation between markets also reflected the G20 nations’ unwillingness to fully cooperate (like in early 2009) in coordinating policies to boost global growth.