The US dollar was hit hard on Wednesday as risk aversion remains the predominant theme in the markets, and traders are now full pricing in at least a 25bp rate cut at the Federal Reserve's next meeting on October 29. Other indications of fear in the markets? The DJIA finished the day down over 4 percent, led by record losses in financials like Goldman Sachs and Morgan Stanley, which happen to be the last of the "big 5" investment banks (Lehman filed for bankruptcy on Monday, Merrill Lynch was sold to Bank of America early this week, and Bear Stearns was sold to JP Morgan Chase in March). Meanwhile, flight-to-safety sent Treasuries higher and thus, yields lower.
Change in Currencies vs. USD Since Yesterday Source: Bloomberg Source: Bloomberg Source: Bloomberg