Risk aversion came back in a strong way to end the week strengthening the Dollar and Yen against all of their major counterparts. Fears over the Euro debt crisis expanded, to Hungary with a Hungarian government spokesperson saying it's no exaggeration to talk about default by the nation. In 2008, Hungary need a $24 billion international bailout to avert default.

A default would mean creditors holding the Hungarian sovereign debt bonds would not get their full investment back. Many of these creditors are banks in Europe and a default would hurt their balance sheets. This is similar to what we saw with Greece except Hungary isn't part of the Euro-zone. Initially the markets will sell the Hungarian currency - the Forint - and banks will try and minimize their exposure to the country's debt.

The EUR/CHF pair roared to a record low as the Euro was sold off and investors poured into the safety of the Switzerland banking system. Another reason for the Franc gains was that at the end of 2009, the Swiss franc made up about 62% of total outstanding Hungarian banking sector loans, compared with about 31% for the forint. That has caused a massive forced covering of forint exposure, which has driven the Franc higher.

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The Swiss National Bank had been intervening in currency markets to keep the Franc from appreciating against the Euro, but let the EUR/CHF pair fall through the 1.40 area, the price it last tried to protect.

In the US, a softer-than-expected jobs report cast doubt on the US recovery. US stocks were down sharply further pressuring the Euro, which dropped below the $1.20 for the first time since March 2006.

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The Yen was a strong performer as well, while commodity currencies like the Canadian and Australian Dollars were sold off.

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