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FX VOICE: Is dollar the new risk barometer?

The euro has rebounded against the dollar recently, floating the question whether the positive correlation to risk has been broken. If so, what could this mean for Asian currencies?
 CT asks the experts.
FX VOICE: Is dollar the new risk barometer?

Woon Khien Chia, head of local markets strategy, emerging Asia, RBS:
The euro’s recent rebound against the US dollar raises the possibility that the currency’s positive correlation to risk has finally been broken and that the market should look to the US currency as the risk barometer. If so, it does not bode well for Asian currencies this year. But it is still too early to say.
 
Despite talk of recovery in Europe, Spain and Italy still pose major risks. Meanwhile, the US appeared to sail over the fiscal cliff with only minor turbulence. February offers growth-sapping spending cuts as the price for avoiding a disastrous US government shutdown – or worse, an unthinkable US default.

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