In a released statement from Qatar Prime Minister (PM) Sheikh Mohammed bin Abdulrahman Al Thani, following a phone call with Iranian Foreign Minister (FM) Abbas Araghchi, Al Thani said that he discussed the latest military escalation in the Middle East between the United States (US) and Iran. He condemned attacks on commercial ships transiting the Strait of Hormuz — a critical choke point for nearly 20% of global energy supply — and urged all parties to commit to the existing memorandum of understanding.
There is a slight buying interest seen in the US Dollar following the remarks from Qatar. At press time, the US Dollar Index (DXY) rebounded to near 100.90, recovering some of its early losses.
Risk Sentiment FAQs
In the world of financial jargon, the two widely used terms “risk-on” and “risk-off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market, investors start to play it safe because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise and most commodities — except Gold — will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and cryptocurrencies rise. In a “risk-off” market, bonds go up — especially major government bonds — Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR) all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods, as investors foresee greater demand for raw materials due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar benefits from its status as the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe given that the largest economy in the world is unlikely to default. The Yen rises from increased demand for Japanese government bonds, a high proportion of which are held by domestic investors unlikely to sell even in a crisis. The Swiss Franc benefits from strict Swiss banking laws that offer investors enhanced capital protection.
