Dollar Falls on Speculation Traders are Reducing Risk Exposure

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Dollar Falls on Speculation Traders are Reducing Risk ExposureThe dollar plunged against the euro on bets that traders, who are licking their wounds after the Swiss National Bank abolished the currency cap against the euro, are reducing the amount of market risk they can cope with.

The U.S. currency fell 0.6 percent to trade at $1.1634 per euro as of 3:45 p.m. in London after touching $1.1460 on Jan. 16, its highest level since Nov. 2003. The dollar remained slightly unchanged at $1.5166 against the pound and at 117.55 yen.

The dollar mainly lost ground against the yen due to the tumbling Chinese stocks that sent investors scampering for safe haven assets.

“The theme we are seeing is one of general risk reduction,” Michael Sneyd, a London-based currency strategist at BNP Paribas SA, told Bloomberg News. “Investors generally lost money when the floor went. As a response we are seeing investors generally reducing risk in the FX market. Bullish dollar is the most prevalent theme, so as people reduce exposure it’s long-dollar trades, which are trimmed back the most.”

The euro advanced 0.6 percent to trade at 136.78 yen on speculation the European Central Bank may roll out stimulus measures in its policy meeting on Jan. 22. It had earlier plunged to 134.71 on Jan. 16, its lowest level since Oct. 16. The euro advanced 2.4 percent to 1.01781 Swiss franc after declining to 99.41 centimes at the close of last week’s trading.

U.S. financial markets were shut today for a holiday. The market is monitoring this week’s ECB meeting in which policy makers are set to discuss a raft of stimulus measures, including quantitative easing. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com