US Dollar Rallies as Risk Aversion Takes Hold of the Markets

US dollar is rallying as risk aversion takes hold of the markets. Financial markets are falling everywhere, from high beta currencies to stock markets. Concerns about the eurozone are mainly driving today’s risk averse atmosphere. With so many concerns, it’s little surprise that the US dollar is heading higher.

One of the biggest concerns right now is the Spanish banking system. Spanish banks are struggling, and the recent bailout of Bankia is feared to be the first of many. Now, there is speculation that Spain will race Greece to a eurozone exit, and that has many Forex traders nervous. All of the current fears are dredging up old fears about whether or not Greece will be able to form a government. On top of that, the Northern Italy earthquake yesterday is boosting fears about what will happen to an already-problematic Italian economy.

With all of this bad news, it is little surprise that the US dollar is rising on safe haven demand. Greenback is gaining ground today. The US economy has its own problems, and there are deficit issues in the United States, but those points seem rather small when compared with the big problems threatening to bring down Europe. For now, the US dollar is likely to remain the currency of choice, especially against the euro.

At 14:11 GMT EUR/USD is down to 1.2425 from the open at 1.2502. GBP/USD is down to 1.5556 from the open at 1.5640. USD/JPY is down to 78.9150 from the open at 79.5100.

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