Currencies closely tied to risk continued their decline as investor’s position themselves for a global slowdown. Risk events from all over the globe ensured the high yielders such as the Australian dollar, New Zealand dollar, along with the Euro have been sold left right and centre by currency traders in Asia and early European trade.

Initiating the risk off sentiment was the RBA reversing their previous hawkish stance on monetary policy with a rate cure of 25bps. The RBA decided that with growth remaining moderate, and inflation close to target a more neutral policy stance would be consistent with achieving sustainable growth. AUD/USD has since given up the 1.0400 handle, finding support around 1.0318.

The selling of Australian dollars intensified as China’s Purchasing Mangers Index missed expectation with a reading of 50.4, the worst number in 2 years. Over the past few years investors have looked to China as the engine for global growth, and the Australian economy has been one of the main beneficiaries. Therefore, the weakness in Chinese data is also expressed through the Australian dollar.

European trade hasn’t provided much relief to the risk off sentiment driving trade. The single currency has broken below 1.3700 as the slowdown in the Eurozone has increased the chances of new ECB chairman Draghi implementing an interest rate cut. Furthermore, Greek Prime minister Papandreou has called for a referendum over EU’s bailout plan. The prospect of Greece rejecting the required austerity measures are real, and the risk of a Greek default is back on trader’s radar.

As a result of the ongoing uncertainty both in Asia and Europe the U.S dollar has found support form safe haven flows. The green back has strengthened against the Euro, Aussie and Kiwi. With other traditional safe haven currencies such as CHF and JPY both at the mercy of intervening central banks the U.S dollar is in vogue. With risk aversion likely to be the overriding driver of trade during the coming months the U.S dollar may well continue to appreciate. There are few major currencies as alternative safe haven options.