- The AUD/JPY can lose ground as the demand for safe refuge increases amid the growing tensions in the Middle East.
- President Trump demanded the “unconditional surrender” of Iran.
- Japanese Prime Minister ishiba declared that cash delivery is the fastest way to support low -income households.
The AUD/JPY maintains profits after registering almost 0.50% losses in the previous session, quoting around 94.20 during the European hours on Wednesday. However, the bullish potential of the currency crossing could be limited due to the increase in the demand for safe refuge, driven by growing tensions in the Middle East. This greater risk aversion exerts downward pressure on the Australian dollar (aud) sensitive, while contributing to the support of the Japanese Yen (JPY).
US President Donald Trump published on his social media platform on Tuesday, asking for the “unconditional surrender” of Iran. The US Army is deploying more combat planes to strengthen its presence, three officials said. Meanwhile, Israel could intensify its attacks against Iran, while the United States (USA) is considering expanding its role in the conflict.
President Trump said he wants a permanent purpose to Iran’s route to nuclear weapons after his early departure from the G-7 meeting in Canada. However, Tehran has urged several countries, including Oman, Catar and Saudi Arabia, to urge US President Donald Trump to declare a high immediate fire.
Operators expect Australia’s upcoming labor data, including employment change and unemployment rate, scheduled to be published later this week. Employment figures will probably offer a new impulse to the domestic economy and will shape the expectations about the policy perspective of the Bank of the Australian Reserve (RBA).
On Wednesday, Japanese Prime Minister Shigeru Ihiba said that cash delivery is the fastest and most effective way to help low -income homes to meet high prices. Ishiba said he had agreed with President Trump to continue tariff conversations at the ministerial level and will continue to work intensely to achieve a commercial agreement with the USA.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
