The U.S. Dollar rose Tuesday as higher-yielding currencies came under broad selling pressure on growing risk aversion, in turn boosting the greenback. World stocks fell to their lowest level since September 2009 on Europe contagion fear and amid growing tension between North and South Korea. Worries about a fresh financial crisis prompted investors to reduce holdings of riskier assets such as shares while seeking the safety of the U.S currency.
U.S. stocks fell early, joining in the broad global sell-off and the concern that economic recovery will be hampered, but pared losses late and ended mixed. Equities are broadly viewed as an indicator of future energy demand growth.
Traders said with liquidity in the forex market showing signs of drying up; investors are likely to scramble for safe-haven Dollars. That is likely to keep downward pressure on growth-linked currencies such as the Australian Dollar.