After the Abu Dhabi financial authority bailed out Dubai with $10 billion, concerns that a major debt disaster involving European banks cooled down today, allowing risk appetite to grow and forcing the greenback down versus the South African rand.
USD/ZAR declined and closed at 7.5150 today from an opening rate of 7.5438.
The U.S. dollar had its rally halted today as optimism surged regarding the Dubai financial situation, as its brother Emirate, Abu Dhabi, started a bail out process essential for avoiding chaos in financial markets world wide, fueling traders with optimism and declining attractiveness for the greenback slightly.
EUR/USD traded at 1.4653 from an opening rate yesterday of 1.4624.
A combination of downtrends in European stocks towards the end of this week and a U.K. deficit report who showed the worst figures since 1993, when they were officially initiated, forced the pound down versus the U.S. dollar, the Japanese yen and the European common currency.
GBP/USD closed at 1.6495 this Friday from levels as high as 1.6872 during the week.
After posting a negative performance last week versus its main rivals, the euro and the dollar, the pound had a breather today as risk appetite returned to equities and commodities markets, providing support for the U.K. currency to pare much of its losses versus the greenback and halt an advance of the European common currency.
The British pound posted the best performance today versus the Japanese yen, a refuge currency that lost attractiveness today as risk appetite returned to stock markets helping the FTSE 100 Index of stocks to post gains over 1.5 percent. Virtually all types of commodities rose today after a considerable decline in the end of the last week, when a decline in the crude oil rates was one of the main factors bringing risk aversion among traders. The U.K. financial scenario is expecting a GDP quarterly report to be published later on this week, which will definitely determine the pound’s trend and outlook for this week, since concerns regarding the country’s economic recovery still high.
Stocks are the main reason behind pound’s excellent performance today in currency markets, according to most of the analysts. Expectations are that the GDP quarterly figures can bring another good surprise for the U.K.’s currency, and this can be already perceived on the pound’s charts.
The Canadian currency is highly influenced by stocks and commodities prices due to its
USD/CAD traded at 1.0553 as of 16:37 GMT from a previous rate of 1.0697 yesterday.
After a losing week versus the U.S. dollar and the euro, the Brazilian currency had a rebound today as optimism returned to markets bringing investors to inject capital in emergent economies, providing support for the Brazilian real to advance versus several main traded currencies.
The real finally gained today after 4 consecutive days losing versus the greenback as commodities rebounded today thanks to optimism regarding the economic growth forecast for the biggest economy in Latin America, attracting investors to purchase assets in Brazil and maintaining the real as the best performer among 16 main traded currencies in
The month of May posted the biggest losses for the U.S. currency in a one-year period against the euro, as equities markets continue to rise on optimism about improvements in the global economic situation.
The greenback lost ground against currencies around the world, and after South Korea affirmed that its state pension fund will sell Treasury bonds and diversify their investments to other assets, the Australian dollar and its New Zealand counterpart rose sharply against the North American currency. In Europe, the dollar lost ground against the pound after an unexpectedly favorable report on house pricing in the United Kingdom damped demand for refuge currencies. Among the main currencies, the Japanese yen also slid together with the dollar, also due to improved confidence in markets spurring risk appetite among traders.
The dollar and the yen are under pressure, according to financial consultants. Instability still penetrates several sectors of the world economy, but signs of recovery coming from multiple reports in different corners of the globe brought risk appetite to markets sooner than what most economists could predict, and currencies like the yen and the greenback, regarded as safe investments, are threatened in a new scenario of diminished risk aversion.
After several days driven by risk appetite globally favoring
The Japanese currency beat almost all of 16 main traded currencies in
Analysts point that not only Chinese Premier’s comments influenced markets today, as it can be understood that after 3 days of strong bullish patterns, a number of traders would be repatriating their profits, which causes a corrective movements for the yen which has been losing during the past months when risk appetite is strong.
The Australian dollar together with the Japanese yen were the biggest winners this Thursday as risk appetite declined, favoring the Japanese currency safe refuge profile and a report in Australia showed an increased number of jobs added in October, helping the Aussie to touch a two weeks high versus the yen, and the highest level in 15 months versus its U.S. counterpart and the British pound. The Australian dollar has been ranking as the second best performer in 2009 among the 16 main traded currencies, thanks to the country’s economic resilience and the early decision of the Reserve Bank of Australia to start a consecutive monthly interest rates hike that is likely to be a record of 3 straight months if confirmed in December.
Analysts are highly optimistic that such employment report will be essential to provide support for the central bank to continue its interest rates rise policy, as favorable jobs data are a strong signal of stability and recovery for any economy leaving a recession period.
Bernanke spoke yesterday at the presentation of the Citizen of the Carolinas Award in Charlotte Chamber of Commerce, Charlotte, North Carolina. The main idea of his speech can be narrowed to the assumption that the inflation risks are overthrown by the increased indicators of economical growth slowdown. That must hint the market participants that the upward trend in interest rates policy has finally ended and now we’ll see some aggressive measures by FOMC to create better conditions for cheaper money.
Dollar’s reaction to such news from Federal Reserve was quite strange, especially considering that lower interest rates would increase carry trade positions against dollar. But after all, if Fed is doing the changes that will improve U.S. economy and fix the global bank liquidity crisis, then it will certainly should add confidence in the U.S. currency, and because stability attracts investing – both bonds and stocks purchases by foreigners will increase demand for dollar.
New Zealand dollar rose against all other major currencies after the Reserve Bank of New Zealand left the Official Cash Rate (OCR) – short-term lending interest rate – unchanged at 8.25%. And as it was hinted by Bank Governor Alan Bollard the rate is not likely to be lowered until 2009.
Alan Bollard marked labor market problems and the slowdown in housing sector as the main obstacles for the economical growth increasing:
Economic activity has occurred largely as outlined in the September Monetary Policy Statement. Capacity pressures – particularly in the labour market – remain significant, while the housing market has clearly slowed. A substantial income boost is still expected to occur through 2008, as recent dairy price gains reach farmers.
High interest rates in New Zealand for a long time were the main attractor for the Forex traders that favor carry trading. Keeping the rates at 8.25% gave NZD a significant boost against major currencies – NZD/USD increased by more than 0.8% and NZD/JPY gained more than 1.7%. However, this growth might be a temporary speculation which will see some correction today, but if carry trade survives, the general trend for New Zealand dollar will be definitely bullish.
The United Arab Emirates decided to cut their bank repository rate by 0.25% to 5.25%; Saudi Arabia decreased its benchmark rate for deposits also by 0.25% to 4.0%; Qatar and Bahrain reduced their deposit rates by the same amount – 0.25% to 4.0%. Kuwait refrained from changing the country’s interest rate, because they’ve already removed their currency’s peg to dollar back in May 2007.
Lowering the interest rates goes against the general monetary policy of the Gulf countries in the way that it stimulates inflation, which is already very high due to the devalued dollar. Fighting inflation is an important task stated by the government of U.A.E. and this rate cut can only boost up the prices growth.
Although this step contradicts anti-inflation policy, it is almost doubtless that such a small rate change won’t hurt a lot. The possibly better side effect of this change would be another reason for consideration of the dollar peg abandonment by these oil countries.
Several reasons brought the Russian currency down since last week, which lost against the euro and the greenback for seven days in a row after oil prices went down, the national budget deficit widened and the interest rates in Russia suffered the fourth cut in less than 6 months. Economists stress in the fact that a weakening demand for oil and growing concerns regarding the global recession are weighing on the ruble, that may extend its losses as long as this negative scenario prevail.
USD/RUB traded at 32.76 as of 23:33 GMT rising from a previous rate of 32.67.
After Bank of Russia lowered interest rates in the country, the number of investors looking for funding through lends in the country increased, providing support for the ruble to gain versus most of 16 main traded currencies this week, as emergent markets have been the most benefited from this new wave of confidence that pushed investors to purchase riskier assets in countries like Russia and Brazil. Being a country rich in natural resources, the rise in the price of crude oil and other commodities rates also influenced positively the outlook for the Russian currency and economy, since regions that are already experiencing a solid recovery like the Eurozone are the main destinations for Russian primary exports.
The crude oil, one of the main Russian primary exports, continued to gain and hit the $80 level for the first time this year, helping the ruble to extend its rally versus most of the main traded currencies after the Russian Finance Minister affirmed that the country is officially out of recession, based on quarterly gross domestic product figures.
USD/RUB closed today at 29.23 from an opening rate of 29.25.
The pound continued to be traded at low levels versus the euro and specially the greenback as new evidences that banking conglomerates in the United Kingdom are still facing a complicate situation and will need further stimulus from the government to avoid bankruptcy.
The pound tumbled further down today even if recovered much of its losses later on as one of the biggest banking institutions in the country declared that it will borrow more funds from the state, evidencing the negative situation in which the financial sector in the United Kingdom remains stalled, decreasing attractiveness for the pound, which has been one of the worst performances since the global economic recovery started in the first semester of 2009, as traders could opt for better options in both risk driven sessions and pessimistic days, leaving the pound in a second class of investments. Lloyds Banking Group Plc. and the Royal Bank of Scotland are among the main U.K.’s financial institutions that will require further help from the government to avoid bankruptcy.
The European currency surged against the Japanese yen and the other major Forex-traded currencies today as the traders reacted to the signs of the global economy recovery with buying high-yielding assets and currencies financed by relatively cheap loans in USD and JPY.
The euro has already recovered one third of its Friday daily drop against the Japanese currency. Positive reports from Australia, signaling a sure recovery from the recession, added optimism to the currency markets. The euro also gained versus the British pound as the latter moves not so fast against the dollar and the yen.
The ongoing recovery of the euro and the other high-yielding currencies may also be a part of technical correction, which followed a yen’s rally after CIT Group Inc. filed for bankruptcy on November 1st. Some analysts point out that the economical recovery process is what helps the euro, as the recovery itself (with a jump from decline to growth) supplies a good opportunity for a high-risk and high-yield gain.
The euro along with the Australian and New Zealand dollars is the current favorite for the carry trade opportunities on Forex. With 1, 3.25 and 2.5 percent, respectively, they stand against 0.25 and 0.1 percent interest rates of the U.S. dollar and the Japanese yen, respectively.
After speculations suggested that the Federal Reserve is discussing future steps regarding interest rates in the United States which remain at a record low level, markets tumbled and demand for safety emerged in trading markets, forcing the euro and
The dollar is remaining the best option in turbulent times taking a place which has been occupied by the Japanese yen during the worst moments of the global slump, but it is also finding support considering that the economic situation in the United States is not significantly worse than other economic regions in the world, fact which contradicts the current devaluation for the U.S. currency.
he Mexican peso had a negative day losing versus most of 16 main traded currencies as the national congress approved new tax regulations that may affect Mexican assets attractiveness, shunning investors from the Latin American nation.
After a series of new taxes approved by the Mexican congress, fears rose that Mexico will be downgraded in investment ratings, speculations which already affected negatively the peso’s outlook today in currency markets, specially versus the U.S. dollar.
The market participants pushed the Singapore’s dollar up before the government reports on its stimulus package in the new budget. The fight with the recession may continue without the serious depreciation of the currency as the central bank said that they won’t change their stance on the dollar during the next few months.
Analysts believe that the current withdrawal of the bets that the monetary authorities are going to depreciate the currency will help the Singapore’s dollar to stand still against the U.S. dollar. Earlier, traders built up the confidence that the depreciation will be issued before April to stimulate the economy, now they will have to wait at least until that month for something to happen.
The Canadian dollar had the first session of recovery versus the greenback and several other major currencies after traders speculated that the current losing streak was not reflecting the present status of the Canadian economy, which is being one of the most resilient among wealthy nations.
Even if Bank of Canada policy makers are constantly stressing on the fact that loonie rates should go down to ensure a fast recovery for the Canadian economy, the loonie gained today after several days of negative performance, after investors interpreted BOC statements as not-so-relevant compared to fundamental data regarding the Canadian economy during the past quarter, which is indicating a solid and resilient economy. The loonie gained today versus almost all major traded currencies except the yen, which gained significantly as investors opted for safety in a day of bearish performance in equities and commodities markets.
Analysts agree that even if policy makers are affecting the loonie’s perform in the short-term, the sentiment towards the Canadian currency remains very positive, as it’s back by crude oil rates, one of the main Canadian exports to the U.S., as also on the North American national economic fundamentals, which are better than most economic regions throughout the world.
The Canadian dollar, which posted consecutive days of losses during this week changed its negative trend after stocks recovered globally fueled by a report that showed a quarterly growth for the U.S. economy, which sparked risk appetite once again among traders.
The Canadian currency found grounds to recover part of this week’s losses as the U.S., main trading partner and biggest consumer of Canadian commodities posted the first quarterly growth this year, reviving attractiveness for the loonie which had a number of downgrades in its outlook after the Bank of Canada started to stress on the fact that a strong currency can be an obstacle for a country’s economic recovery, raising fears that interventions can follow a strong rally for the Canadian currency. Even considering today’s rebound, the Canadian dollar is still losing versus its U.S. counterpart in the weekly comparison.
Today’s U.S. growth report was the main reason for the Canadian dollar to gain, as demand for commodities were increased in trading markets, facilitating the loonie to gain significantly, since the country is one of the world’s largest oil producers and one of the biggest suppliers to the United States. The loonie is likely to remain attractive, but as long as the Bank of Canada continues to make negative comments towards the currency’s rally, it is not probably that the loonie will climb massively.
Market sentiment suffered a significant shift today in Europe after Societe Generale SA, one of the biggest banking empires in France with branches around a number of European countries, posted better than expected earnings for the previous quarter, increasing attractiveness for assets in the Eurozone, but also favoring emergent market currencies and affecting the U.S. dollar performance negatively, as it rallied for a few days after touching a 14 month low when it crossed the $1.50 line versus the euro. The Japanese yen, one of the best bets in days of instability lost this Wednesday versus all of 16 main traded currencies, as investors opted for riskier assets regionally in countries like South Korea and Malaysia.
The euro found its way back to valuation today as risk appetite surged in Europe, but it is hard to determine what trajectory it will take towards the end of the year since a percentage of analysts consider the current rates for the Europe currency too high, making it hard for investors to enter a point of consensus regarding the short term future of the euro.
After posting the sharpest fall in 8 months in the beginning of this week, Brazilian stocks rebounded this Tuesday, providing support for the real to gain versus most of the 16 main traded currencies in
Increased demand for commodities and a rebound in Brazilian stocks provided support for the real to erase some of the losses it posted in the beginning of this week, as traders were confident to reinvest money in Brazilian assets, helpingBOVESPA, the biggest national stock exchange market, to rebound this Tuesday.
