Currencies: Haven Currencies Rally As Risk-averse Traders Take Cover

The U.S. dollar climbed against many of its rivals early Wednesday, but lost ground versus the likes of the Japanese yen as geopolitical worries boosted traditional haven currencies.

Softer-than-expected economic reports from the eurozone and U.K. also sent traders toward the buck.

Don’t miss: Emerging markets feel the pain as dollar, Treasury yields rise

How are currencies performing?

The ICE U.S. Dollar Index DXY, +0.43% which tracks the greenback against six rivals, rose 0.4% to 93.993 on Wednesday. The broader WSJ Dollar Index BUXX, +0.31%  was up 0.3% to 87.36.

Check out: Being long the dollar is cool again

But also: Why it may be downhill from here for the dollar

Against the Japanese yen USDJPY, -0.80% the dollar dropped to ¥110.08, down from ¥110.90 late Tuesday in New York.

Versus the Swiss franc USDCHF, +0.2115%  — another haven currency — the dollar also slipped earlier in the session, though the pair was last little changed with one dollar buying 0.9931 francs.

The euro EURUSD, -0.6452% fell to $1.1709, down from $1.1780 Tuesday, marking its lowest level since November, while the British pound GBPUSD, -0.6030% slid to $1.3349 from $1.3432, also its lowest since late last year.

Emerging market currencies were weaker across the board, with the Turkish lira USDTRY, +4.1464% continuing its recent unraveling and falling to a record low against the U.S. unit. One dollar last fetched 4.8405 lira, up from 4.6691 late Tuesday.

See: Turkish lira hits historic low as Erdogan eyes control of country’s central bank

What’s driving the FX market?

With geopolitical concerns in focus, the risk-off attitude took hold of the foreign exchange market, letting the likes of the yen and franc run higher, while emerging markets units were weaker versus the dollar across the board.

On Tuesday, President Donald Trump told reporters he wasn’t really happy with the progress of U.S.-China trade talks, and hinted that his summit with North Korean leader Kim Jong Un may not go ahead as planned.

Emerging markets are suffering under the risk-off sentiment and sold off further, adding to concerns about the large-scale selloff that has driven currencies such as the Turkish lira, Argentine USDARS, +0.7361%  or Indonesian rupiah USDIDR, +0.45%  to record or multiyear lows against the U.S. dollar.

Meanwhile, weaker-than-expected economic data in Europe weighed on the euro and pound. Purchasing managers indexes for manufacturing and services in the eurozone disappointed on Wednesday, coming in below forecasts. And a report showed U.K. consumer prices rose 2.4% in April, down from 2.5% in March and missing expectations for a 2.5% reading.

Read: Why the Bank of England might not be in a hurry to raise rates

And see: ‘Greek-like crisis’ fears hang over Italy’s markets as populists ready government

What are strategists saying?

“Market sentiment has taken a step back as traders are looking more towards safe haven plays such as the yen,” said Richard Perry, a Hantec Markets analyst, in a note.

“Trump has tended to have less of an impact recently, but he seems to be an increasing factor for market sentiment and direction again.”

What else is in focus?

Flash services and manufacturing PMIs inches up in May. The manufacturing reading stood at 56.6 versus 56.5 in April, while the services indicator rose to 55.7 from 54.6 in the previous month.

New homes sales came in at 662,000 in April, compared with consensus expectations of 682,000.

Later on, the Federal Reserve will release the minutes from its May 1-2 monetary policy meeting.

In other assets, the 10-year U.S. Treasury yield TMUBMUSD10Y, -1.68%  dipped lower to 3.023%.

U.S. stocks started the day lower, joining global equities in a down day.

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