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Forex: Continued decline in indices and dollar bounce sets investor risk aversion in stone

If ever there was an indication of risk aversion you only have to look at today’s price action in the FTSE 100 and the dollar’s bounce. To start with this morning investors initially thought this was a good buying opportunity and we saw the London benchmark jump seventy points on the open, following a strong rally by US indices off their lows in last night’s session. But it only took fifteen minutes to realise buyers simply weren’t ready to return to the market yet and a full blown reversal saw the gains wiped out within the first hour of trading. Since then a crash might aptly explain the sell off that we’ve seen with the FTSE now just one hundred points off the psychological 6000 level. Few stocks were immune to the selling with Man Group topping the handful of risers in the FTSE 350, one of the rare stocks that is likely to benefit from the recent market turmoil.

The other interesting move is the dollar which is higher this morning. The US dollar has suffered so far in October as global growth concerns mount, which also triggered the sell off in indices and commodities such as oil. This has called into question the speed with which the Federal Reserve will raise interest rates in 2015, but investors are being attracted by the dollar’s safe haven status this morning which is yet another indication that they are running scared at the moment. The month of October, historically the most volatile of the year, is living up to its reputation and we may not have seen the worst yet.

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