The weakening of the traditional shelter currencies - JPY, CHF - is setting a positive tone. The USDJPY has updated to a new high since 1998, above 136, indicating a return of risk appetite in some financial market segments. USDCHF settled near 0.9660, stopping the decline after last week’s unexpected SNB rate hike.
The euro and the pound are also gaining against the dollar, signalling a recovery in risk appetite. However, it is essential to note the fragility of the current rebound. Most likely, we will see a corrective bounce after the worst week in equities in more than two years.
However, finding medium-term reasons to buy “risk” is still tricky. Aside from the BoJ, the main central banks are tightening policy or promise to do so as soon as next month. And so far, we see no sign that this trend is about to end or reverse.
Thus, cautious investors can still only tune in for a short-term bounce but do not hold out hope that the markets have bottomed out.
