Pound Sterling Exchange Rates: GBP to AUD, NZD & ZAR Gain after Boston Bombs Trigger Investor Panic

Modified: Tuesday, 16 April 2013 08:51 BST - Written by Frank Davies

STORY LINK Pound Sterling Exchange Rates: GBP to AUD, NZD & ZAR Gain after Boston Bombs Trigger Investor Panic

Yesterday’s session brought dramatic movement in the currency markets, as institutional investors shifted out of risk-laden assets in response to a heady mix of weak Chinese data and potentially toxic geo-political situations.

The start of the week was always bound to be fraught, given that the 15th March marks the birth date of North Korea’s ‘eternal leader’ Kim il-Sung. Political analysts had been expecting a show of military strength from Pyongyang to mark the occasion. What they got instead was a continuation and deepening of the recent threatening political rhetoric from North Korea’s leaders. The secretive Communist state grasped the opportunity to send out a message to South Korea and her allies with both hands, with state news agency KCNA commenting that, "our retaliatory action will start without any notice from now."

The markets did not react well to this upping of the urgency of the recent war talk from North Korea. Risk appetite had already taken a severe blow during Monday’s Asian session when Q1 Chinese GDP growth data revealed an unexpected drop off in the levels of economic activity in Asia’s leading economy during the first three months of 2013. The comments from Pyongyang increased the mood of risk aversion, sending stock markets sharply lower and causing market participants to shift out of risk-sensitive currencies including the Australian and New Zealand Dollars and the South African Rand.

Events in the USA after yesterday afternoon’s European close caused panic levels amongst institutional investors to soar, draining the high-yielders of further support. The news that two incendiary devices had exploded close to the finish line of the Boston marathon, killing three people, increased selling pressure on risk-sensitive assets. By the latter stages of yesterday’s North American session, the Pound to Australian Dollar exchange rate (currency : GBP AUD) was trading up by over 1.5% on the day. Meanwhile, the Pound to South African Rand rate (currency : GBP/ZAR) had gained the best part of 3% and GBP NZD had moved higher by just under 2%. With no organisation having claimed responsibly for planting the bombs as yet, investor sentiment remains subdued.

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