Downward pressures for the US dollar flared as the International Monetary Fund forecasted a 25 percent chance of a global recession, and led investors to ditch higher yielding assets. Consequently, the US dollar plunged the most against the low yielding Swiss franc, with the Yen following closely behind as the pair fell to the 101.6 range. The downgraded outlook also lowered the US dollar against its European counterparts as the euro appreciated to 1.583, while the British Pound inched higher to 1.975. The commodity currencies however, were the only currencies to trail against the US dollar, with Canadian dollar taking the biggest plunge amid record high oil prices.
Bearish sentiment took hold of the stock markets as oil prices touched a new intraday record of $112 a barrel, and lead the markets to retrace early morning gains. As a result, the DJIA fell 49.18 points to 12,527.26 points, with 21 shares of the big 30 declining. The broader S&P500 shaved11.05 points to hold at 1,354.49 points, with declining issues more than doubling the number of advancing issues.
Demands for US Treasuries accelerated as future growth prospects look increasing dim, and lead many risk adverse investors to move their investments into the safe haven to risk free bonds. As a result, the benchmark 10-Year yield dropped to 3.486 percent from 3.564 percent, while the 2-Year yield plunged to 1.774 percent from 1.884.
Looking ahead, we expected increased volatility to surface by early morning as the Bank of England and the European Central Bank will meet to set key rates at 11:00 GMT and 11:45 GMT, respectively. Follow the rate decisions, Fed Chairman Bernanke will be speaking about financial stability at 17:00 GMT, and we expect the markets to settle down after the ICSC Chain Store Sales index at 17:30 GMT.