Japan Crisis Update : Fear of Nuclear Meltdown Causes Flight to Safety in Currency Markets - USD CHF JPY Gain, While AUD NZD ZAR Rates Plummet

15 Mar 2011 at 7 AM - Written by John Cameron

STORY LINK Japan Crisis Update : Fear of Nuclear Meltdown Causes Flight to Safety in Currency Markets - USD CHF JPY Gain, While AUD NZD ZAR Rates Plummet

The Pound Japanese Yen exchange rate (GBP/JPY) is 131.57.

Fears of a full-scale nuclear meltdown in Japan are growing following an overnight blast at a third reactor at the stricken Fukushima power plant. Japan’s Chief Cabinet Secretary, Yukio Edano, has commented in recent hours that, "now we are talking about (radiation) levels that can impact human health," as residents living within 18 miles of the plant were checked for contamination and warned to remain indoors.

French officials yesterday warned their nationals who remain in Tokyo that a radioactive wind could reach the Japanese capital within hours, causing further fear, whilst Japanese Prime Minister Kan stated in a televised address overnight that, "there is still a very high risk of more radiation coming out."

Events in Japan have hit equities markets hard; the Nikkei 225 index in Tokyo was down by 16% at one point during the overnight session as investors panic-sold, but recovered some of this lost ground before the close. The FTSE 100 lost almost 1% during yesterday’s session and the S&P 500 closed down by over 0.50%. Futures markets are signalling more losses during today’s session, when Europe an North America open.

As the European session gets underway, the currency markets are showing classic signs of a flight to safety - the US Dollar and Swiss Franc have strengthened across the board, as investors shift their funds into safe-haven assets. The Japanese Yen has also strengthened as Japanese multi-nationals repatriate funds in order to fund short-term clear-up costs.

On the other side of the coin, the Australian Dollar, South African Rand and New Zealand Dollar have all suffered significant losses as market participants move their holdings out of high-risk, high-yielding currencies.

Data releases will be of secondary importance to the markets today as investors closely monitor developments in Japan and alter their positions accordingly.

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