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Those Central Bank Moves Are Taking a Toll

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Investors know what they want, and it isn't the G4 currencies.

When the European Central Bank, the Federal Reserve, and the Bank of Japan all announced big stimulus measures earlier this month, investors went on a buying spree. They're still buying - but they're steering clear of the biggest, most liquid currencies, known as the G4.

"The USD is the second worst performer among majors and ZAR, NOK, RUB, TRL, NZD, SEK and MXN are the top seven performers," wrote Steven Englander, global head of G10 FX strategy at Citigroup , in a note to clients. "The bottom five are CAD, USD, EUR, GBP, JPY. This is less risk-off than G4 off."

Samarjit Shankar, a global FX strategist at Bank of New York Mellon, sees a similar shift. Investors are "making renewed forays into select higher yielding currencies such as the Brazilian real, Turkish lira, Philippine peso," and others, he says.

A stronger than expected consumer confidence report, along with better than expected retail sales data from Canada, are probably helping risk-sensitive currencies. And the stimulus plans from the Bank of Japan and the Fed may be better understood than the European Central Bank's plan for Outright Monetary Transactions, or OMT. "At a minimum it looks like investor uncertainty about how OMT will play out is trumped by the certainty over how QE3 and other G4 liquidity provision programs will play out," Englander says.

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