Libyan turmoil sparks unease in currency markets

The violent unrest plaguing Libya is spurring investors to buy safe-haven currencies and shun risk-linked currencies this week.

The Swiss franc rose on Tuesday, for example, while the Canadian dollar - seen as a play on global growth - declined. Overall, Standard Chartered Bank senior currency strategist Mike Moran told Dow Jones Newswires, market participants are growing more risk-averse.

"Risk appetite has certainly taken a hit, driven by broadening tensions in the Middle East," he said.

The popular uprising in Libya is just the latest to have taken place in the Arab world; across the region, citizens are calling for the ouster of their entrenched autocratic leaders. Libya's Moammar Gadhafi is responding more violently than his counterparts in Tunisia and Egypt, however; reports suggest that military aircraft are bombing protesters and strafing the streets with machine-gun fire.

Not only is the situation in Libya particularly violent - the country is a major oil producer. Continued upheaval in Libya could lead to a spike in oil prices; that, in turn, could slow global economic growth.

On the whole, the currency markets' reaction to the Middle East turmoil reflects how volatile currencies can be.