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May-05-2009Dollar Trades Near One-Month Low on Reduced Demand for Safety(topic overview)
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Gains were limited in the GBP USD because of thin holiday driven trading. The Euro was also met with some intraday selling pressure ahead of this week's European Central Bank meeting. Commodity currencies such as the Australian Dollar, New Zealand Dollar and Canadian Dollar all posted strong gains because the weaker U.S. Dollar and a global economic recovery are expected to ignite demand for commodity exports. [1] The New Zealand dollar was little changed against the U.S. and Australian dollars after the central bank cut interest rates yesterday to record lows.[2] Gains earlier in the week were lost Thursday when the kiwi fell one cent after the central bank cut the official interest rate by half a percentage point to a record low 2.5 percent. The cut was widely expected, and the selling was due to the Reserve Bank of New Zealand's unusual announcement that the rate was expected to remain at or below 2.5 percent until the latter part of next year.[3] The news that German Retail Sales fell unexpectedly in March encouraged selling pressure early Monday morning. All of these reports indicate that an interest rate cut by the European Central Bank to a historically low 1.0% is inevitable.[1]
A better than expected U.S. housing report erased earlier weakness caused by a worse than expected German Retail Sales Report. Gains may be limited to the upside as traders await this week's decision from the European Central Bank. Over the weekend the European Commission cut its forecast for the Euro Zone.[1]
Traders are interested in seeing how big the plan is and what it encompasses. The Euro could be under pressure if this new plan is bigger than estimated. With markets closed in Great Britain, trading was light and choppy, but this didn't stop the British Pound from mounting a small gain. Pressure was on this market early but a better than expected U.S. housing report turned the market around. Traders are now looking at this report as another sign of an impending recovery in the U.S. economy and another reason to increase demand for more risky assets.[1]
SYDNEY, May 5 (Reuters) - The U.S. dollar extended its losses on Tuesday, as a resurgence in risk appetite saw investors dump safe-haven assets and pile in to riskier trades like stocks, commodities and higher-yielding currencies. The dollar lost ground broadly against major currencies, with its index.DXY languishing at five-week lows, as easing concerns over U.S. banks and hopes the worst in the global economy may have passed stoked a rally in stocks nTOPNEWS.[4] SYDNEY, May 4 (Reuters) - The yen and the U.S. dollar extended last week's losses on Monday as better economic data worldwide saw investors grow increasingly confident that the worst in the global economy may be past, boosting risk appetite.[5]
Risk appetite persisted despite light trading because of bank holiday in several key European countries, and will probably extend during next journeys. Japanese Yen is set to lose ground under these conditions, with global stocks markets rallying, and turn investor's intentions in the currency, from safe-haven to carry trade. Meanwhile the FED has decided to delay the results of the bank stress test to next Thursday May 7th, the same day ECB will reveal their last decision about monetary policy.[6] The Australian dollar started the week off on a strong note, gaining more than 1 percent against the U.S. dollar and Japanese yen, as a broad-based pickup in risk appetite provided a boost to FX carry trades. The commodity dollar will face event risk overnight, though, as the Reserve Bank of Australia is anticipated to leave their cash rate target unchanged at 00:30 ET after unexpectedly cutting the rate by 25 basis points to 3.00 percent last month.[7] The U.S. dollar and Japanese yen were the weakest of the majors on Monday, as buoyant risk appetite weighed on the low-yielding currencies but lifted carry trades and equities, with the S&P; 500 ending the day up 3.39 percent.[7]
The U.S. dollar gained ground against the yen touching a two-week high, but could not gain any momentum against the euro as an increase for risk appetite dominated the market.[2]
"The U.S. dollar is understandably on the backfoot as risk appetite continues to surge," said Richard Franulovich, senior currency strategist at Westpac, New York.[4]
Look for the loonie to remain on a strong footing ahead of next week'''s all important PMI and employment numbers. The Australian dollar rallied against its U.S. and Japanese counterparts almost touching a seventh month high against the greenback as an increase for risk appetite dominated trading.[2] Trading will resume on Thursday. AUSTRALIAN DOLLAR: The Australian dollar was expected to be traded in a tight range this week, with anxious investors closely monitoring U.S. banks and the outbreak of swine flu, dealers said.[3]
"Sentiment continues to turn on a dime and in turn so does the fortune of the Australian dollar." A busy week of data in the United States would heavily influence any moves to the currency, she said, particularly the release of bank "stress test" results by the U.S. Federal Reserve. "A number of risk events are also on the horizon for the Australian dollar," she said.[3] After the central bank's last meeting, RBA Governor Glen Stevens said, "The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead," suggesting that further reductions were unnecessary. It will be important to look to Stevens's statement, as signs that the RBA may consider cutting the cash rate target again eventually could weigh on the Australian dollar, while indications of a broadly neutral bias could support the currency.[7] "An escalation in swine flu threat could see demand for the U.S. dollar improve." Locally, the central bank was due on Tuesday to deliver its latest decision on interest rates, and the accompanying statement on monetary policy would give some insight into future moves, she said.[3] The euro is also weaker against the dollar for the fifth straight day following the release of weak GDP data in the Euro Zone. The British pound is also lower this morning. Australia's central bank will announce its rate decision on Tuesday with most market observers expecting the bank to keep rates steady at 3.00%.[8] With three days to go before the ECB addresses the potential for quantitative easing investors don't seem to be overly concerned that the euro will suffer. The Bank of England also meets on Thursday, with no one anticipating any change in its monetary stance. The recent statements from this central bank have been extremely dour and glossed by the dire state of public finances leading to a rather ugly looking borrowing requirement.[9]
The European Central Bank will meet on Thursday and is expected to cut rates by 25 basis points to 1.00%.[8] The CIPS manufacturing purchasing managers' index improved to 42.9 in April from 39.5 in March. Look for the pound to remain range-bound ahead of a UK holiday on Monday, but the market will start to look towards the Bank of England'''s first step of its quantitative easing program of 75 billion pounds next week. The Japanese yen weakened against both its U.S. and European counterparts after the jobless rate came in higher than expected at 4.8 percent with CPI data coming in at '''0.3 percent.[2] U.S. economic news was surprisingly strong, as U.S. data showed that construction spending rose 0.3 percent in March, thanks to increased private and public non-residential construction, while pending home sales rose for the second straight month in March at a rate of 3.2 percent. The Federal Reserve's April 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices showed that, on net, the percentage of respondents that "reported having tightened their business lending policies over the previous three months" was down for the second consecutive month, but remains "very elevated."[7]
Look for overall market sentiment to remain susceptible to any news that may confirm that the swine flu is officially a pandemic. The market will turn its focus to next week's release of the results of U.S. bank stress tests for further direction into the overall health of the U.S. financial system. The euro gained ground against its U.S. counterpart holding close to recent ranges with little data out of the Euro zone.[2]
Look for trading conditions to remain thin as most European markets remain closed for May Day. Sterling strengthened against both its U.S. and European counterparts on the heels of better than expected UK manufacturing data.[2] Range trading conditions have meant that sentiment rarely reaches extremes, and the rare extreme often markets a currency top or a bottom. It remains critical to gauge trend dynamics in assessing the relative worth of these particular trading signals. It remains critical to monitor U.S. Dollar pairs through the near term and manage our trading biases accordingly.[10] Against the U.S. dollar, the Australian currency climbed to a multi-month high of 0.7392 around 11:00 pm ET. The aussie-buck pair, which closed last week's trading at 0.7308, is currently quoted at 0.7373.[11]
SYDNEY, May 4 (Reuters) - The Australian dollar hit seven-month peaks against the U.S. dollar and the safe-haven Japanese yen on Monday as tentative hopes the world economy is on the mend raised demand for riskier currencies.[12] TOKYO, May 4 (Reuters) - The yen and the dollar fell on Monday, hitting seven-month lows against the Australian dollar as investor confidence about the global economy encouraged buying of commodity-related currencies.[13] LONDON, May 4 (Reuters) - The yen and the dollar fell on Monday as growing confidence that the global economy is over the worst encouraged investors to seek riskier assets.[14]
Investors also bought the Aussie because of demand for higher-yielding assets. This increased demand was triggered by trader optimism that the global recession may be easing. Traders are now looking for return on their capital rather than just return of their capital. The recent strength in the global economy may open the window for the Reserve Bank of Australia to leave its benchmark interest rate unchanged at 3.0% tomorrow.[1]
Just last week the Reserve Bank of New Zealand hinted at more rate cuts and an economic decline until mid-2010. This doesn't sound like bullish news to me. News that the first quarter GDP contracted and that the budget deficit is widening could put renewed pressure on this currency pair later this week. The NZD USD may go up on greater demand for higher-yielding assets but the reality is that this economy is not strong enough to justify a rally.[1]
According to a Bloomberg News poll of economists and Credit Suisse overnight index swaps, the ECB will cut rates by 25 basis points to 1.00 percent on Thursday morning. A reduction in line with Bloomberg's estimates could exert bearish pressures on the euro, but where the currency ends the day may have more to do with what ECB President Jean-Claude Trichet says during his post-meeting press conference at 08:30 ET. Many ECB members have indicated that they will announce "unconventional" measures following this meeting, which many have taken to mean credit easing, and if Trichet makes such an announcement, the euro could tumble. If the ECB leaves rates unchanged, indicates that they have no intention of bringing interest rates lower in the near term, or if they put off credit easing, the euro could rally.[7] The Australian dollar may only respond to a surprise rate cut (Credit Suisse overnight index swaps are pricing in a 24 percent chance of a reduction) or a biased monetary policy statement.[7]
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region'''s 10 most-active currencies excluding the yen, gained for a third week and reached the highest in four months on Friday. The MSCI Asia-Pacific Index of shares increased 0.1 percent on Friday, extending its gains in the last two months, as the Federal Reserve this week said a U.S. recession is abating.[15] Foreign exchange investors ventured from their havens this week as global equities rose more than 11 per cent in April, their best month in 22 years, and left the yen and the dollar weaker. Swine flu fears sent investors running to low-risk currencies, such as the Japanese yen, on Monday and Tuesday.[16] Higher yielding currencies like the Australian and New Zealand dollar are stronger today as investors seek better returns. This has impacted the low yielding Japanese yen, which is weaker against the dollar for the fourth day in a row.[8]
The Aussie thus rose to new multi-month highs against the Japanese yen and the U.S. dollar and a 4-day high against the euro.[11] The S&P; 500's continued advances bode well for high-yielders, the Euro, and the British Pound against the Japanese Yen and U.S. dollar. A breakdown in sentiment could just as easily lead to breakouts in these major pairs.[10]
FXstreet.com (Buenos Aires) - With dollar lower past Friday against most rivals except for Japanese Yen, early trading opened quiet with Euro around 1.3260, Gbp above 1.4900 and Japanese Yen quoting at 99.30.[6] Investors stepped up to buy the euro, which is currently trading at $1.3313 while the Japanese yen is weaker at ¥132.40.[9]
Forex (or FX or off-exchange foreign currency futures and options) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments.[1] A busy calendar this week should test the recent resurgence of investors' optimism and risk appetite that has boosted the euro and other currencies against the dollar.[17] TORONTO (Dow Jones)--Economic data and continued gains for stock and commodity prices kept global risk appetites elevated Monday, resulting in more losses for the dollar against a broad range of currencies.[18] TORONTO (Dow Jones)--The dollar is under some pressure mid-morning Monday, as a positive start for equities markets buoys risk appetites despite thin trading conditions due to holidays in the U.K. and Japan.[19]
TORONTO (Dow Jones)--The dollar is modestly higher against the European currencies but lower against the Australian and New Zealand dollars in light trading Monday morning.[20] NEW ZEALAND DOLLAR: The New Zealand dollar finished local trading Friday at 56.55 U.S. cents, slightly up from 56.20 U.S. cents the previous week.[3] With Tokyo markets shut until Thursday for the Golden Week holiday and London on a one-day holiday, trading was lighter than normal but did not stop sterling and the New Zealand dollar from touching two-week highs against the yen.[13]
JAPANESE YEN: The yen slipped against the dollar in the past week following the release of a series of gloomy economic data showing Japan's economic woes, as players adjusted positions ahead of a market holiday in Tokyo.[3] Asian currencies ended the week mainly up against the dollar, but the Japanese yen fell on a raft of gloomy data highlighting the difficulties faced by the world's second largest economy.[3] The Japanese Yen started the day lower but quickly rallied to the positive side following a U.S. housing report that showed the U.S. economy may be recovering.[1] Growing confidence that the U.S. economy is bottoming helped to support the Canadian Dollar. Overnight pressure was completely reversed this morning following a better than expected U.S. housing report.[1] The Swiss Franc was driven higher on Monday on the news that the U.S. economy may be improving. This morning's better than expected U.S. housing report was interpreted as a strong sign that the housing market has reached bottom.[1]
The U.S. Dollar started the day stronger but early U.S. housing and construction spending reports came out better than expected and triggered a reversal in the Dollar.[1] Since risk trends have proven to be the greater driver of price action in the forex markets, a weaker than expected result could trigger flight-to-quality and thus, gains for the U.S. dollar.[7]
The dollar recently fell to intraday lows against the euro, pound sterling, and the Canadian dollar, as equities in the U.S. extended gains following upside surprises in U.S. March construction spending and pending home-sales data.[19] The greenback tumbled against the won on Friday following gains on Wall Street and reports that South Korea posted an all-time record current account surplus of 6.65 billion dollars in March.[3]
The strong surge in the equity markets helped to support the Canadian Dollar. Recent action in this market indicates a strong link to the stock market. Gains in key commodity markets such as precious metals and crude oil also were supportive. It looks as if the Bank of Canada made the right decision in deciding not to apply quantitative easing to the economy. The Canadian Dollar has surged since it decided to take a wait and see attitude on this powerful monetary tool.[1] The stock market in Australia opened on a firm note today with energy and materials posting strong gains in early trading. The benchmark index S&P;/ASX 200, which moved on to 3,815 earlier, is currently trading at 3,807, up 37.40 points over its previous close. The All Ordinaries index is trading at 3,776, up 38.10 points over its previous close.[11] Analysts said the gain in riskier currencies was driven by a confluence of improving U.S. economic indicators, signs that the new flu strain outbreak appeared less severe than feared and rising stock markets.[13] Along with the steady advances by many stock markets over the past two months, some recent economic data from the U.S., Europe and Asia have furthered the notion that the global.[17]
The survey noted a moderation in the decline of export orders and a surge in investment directly related to the $586 billion government stimulus package. The good news helped lift Shanghai stocks higher by 3.3% and while this is good news for China, it's in tune with other global data heralding a slowdown in the pace of contraction.[9]
'''We'''ve seen some good strengthening in the rupiah on the back of easing risk aversion that'''s reflected in the stock markets,''' said Apratim Chakravarty, head of global markets at HSBC Holdings Plc in Jakarta.[15] The Euro/US Dollar effectively remains trapped between staunch support at 1.2900 and similarly stiff resistance in the 1.3300-1.3400 range. Low forex options implied volatility levels suggests we can expect the single currency to remain in its range, but any flare-ups in market tensions could easily force a shift in volatility trends. We will keep a close eye on global risk sentiment and their effects on major currencies.[10] Asian currencies gain, led by won, rupiah, as recession eases BANGKOK (Bloomberg) -- Asian currencies rose against the dollar for a third week as signs a global recession is easing prompt investors to favor riskier assets, helping emerging markets draw funds.[15] THAI BAHT: The Thai baht rose against the dollar over the past week, following the regional trend as investors became more optimistic about global economic prospects, dealers said.[3]
The yen?s weakness reflects recent investor sentiment that the worst of the global recession may be over.[8] "Global investor confidence appears to have gained some positive momentum," said Greg Gibbs, fx strategist at the Royal Bank of Scotland. "Credit default swap, emerging market credit and implied volatility indices have fallen to their lowest levels since October. This resilency in investor confidence suggests the Aussie and the kiwi will rally further in the week or so."[5]
This market comment is prepared by Union Bank of California's Global FX & Derivatives Department for the general information of its customers. It is based of the most accurate information currently available, but should not considered investment advise or a guarantee of future exchange rate or trends.[2] The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice.[8]
Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite.[2] "The underlying resilience of risk appetite can be clearly seen in the ability of asset markets to shrug off several bearish developments including the emergence of swine flu, the bankruptcy of Chrysler and the imminent stress test results for U.S. banks."[4] An expansion of risk appetite creates the desire to relinquish yen holdings (or sell the yen short), which has the positive impact of reducing the noose-hold around the economy's neck.[9] The market will cling to the argument that the end of the tunnel is within sight and risk appetite will likely remain afloat.[9]
Like the euro, event risk for the British pound will be minimal until Thursday, when the Bank of England is expected to leave rates unchanged for the second straight month. A look at the minutes from their April policy meeting showed that the MPC voted unanimously in favor of leaving the Bank Rate at 0.50 percent and to continue their quantitative easing (QE) program. They also said that there was a "high degree of uncertainty" over the amount of asset purchases that would be necessary to keep inflation at target, and if "the evidence warranted it," the Committee could reduce or expand their program. [7] The market will look towards the Reserve Bank of Australia'''s policy meeting next Tuesday where rates should remain at 3 percent.[2]
The impact sent the Aussie dollar higher to 73.67 cents against the dollar. The Reserve Bank of Australia is expected to leave rates on hold at its meeting on Tuesday, while Thursday's reading of employment will likely show 25,000 jobs lost during April.[9]
The central bank had set the yuan central parity rate at 6.8250 to the dollar Thursday, compared with 6.8265 on Wednesday.[3] Malaysia'''s ringgit completed a second weekly gain after the central bank on April 29 left interest rates unchanged and said economic stimulus will help revive growth in the second half of the year.[15] Evidence suggests we could see a surprisingly strong result, which could boost equities and weigh on safe-haven assets. The other thing to watch is Federal Reserve Chairman Ben Bernanke's testimony before the Joint Economic Committee, which is also at 10:00 ET, as his comments tend to be gleaned for indications of any sort of bias. The central bank has generally offered up somewhat optimistic comments that the economy and markets have stabilized, and a reiteration of this sentiment could provide a boost to risky assets.[7]
A separate report showed exports declined 19 percent in April from a year earlier, less than the 23 percent drop forecast by economists in a Bloomberg survey. A central bank survey this week showed manufacturers were the least pessimistic in seven months.[15] Industrial production in Japan rose 1.6 percent in March from the previous month, a Trade Ministry report showed on April 30, double the increase forecast by economists in a Bloomberg survey.[15]
Separately, the Reuters/University of Michigan's consumer sentiment index for April was unexpectedly upwardly revised to a reading of 65.1 from the previously reported reading of 61.9. The Commerce Department also released its report on factory orders for March, showing that orders fell by a bigger than expected 0.9 percent following a downwardly revised 0.7 percent increase in February.[11] In economic news from the U.S. on Friday, the Institute for Supply Management said that manufacturing activity continued to contract in April but at a much slower than expected pace. The ISM said its index of activity in the sector rose to 40.1 in April from 36.3 in March, although a reading below 50 indicates a continued contraction in the sector.[11] Looking ahead to Tuesday, data due out at 10:00 ET is expected to show that conditions in U.S. non-manufacturing sector - which accounts for approximately 70 percent of total economic activity in the country and includes retail, services, and finance - are anticipated to have improved somewhat in April as of the Institute for Supply Management's (ISM) index is estimated to rise to 42.0 from 40.8.[7]
The Fed'''s Open Market Committee said on April 29 that the U.S. economy is contracting at a slower pace than before, while China'''s Federation of Logistics and Purchasing in a statement on Friday said the Purchasing Manager'''s Index rose to a seasonally adjusted 53.5 in April from 52.4 in March.[15] "Players have recently been somewhat optimistic about the U.S. economy, but results of stress tests cannot be all positive," Mamoru Arai, a senior dealer at Mizuho Corporate Bank, told Dow Jones Newswires.[3]
The Japanese currency fell to 99.08 to the dollar in New York late Friday, from 97.13 a week ago. Markets appeared to be bullish because Chrysler applied for Chapter 11 protection and did not move to liquidate its assets to repay its creditors, said SMBC strategist Daisuke Uno. Some market watchers warned that the greenback's rebound might not last long given nervousness about the release this week of the results of Washington's "stress tests" to judge the health of major banks.[3] The Australian dollar advanced to 73.59 against the Japanese yen by 11:00 pm ET, the highest point since October 14, 2008. This may be compared to last week's close of 72.56.[11] Any cut will be bearish for the Australian Dollar but a cut of greater than 24% could trigger a sharp break. Despite the fact that the weekly swing chart is indicating a change in trend to up by the move through.7267, this pair is not expected to sail through to the target zone at.7928 to.8382 without some kind of a pullback.[1] The Australian dollar closed Friday at 73.03 U.S. cents, up from the previous week's close of 71.33 U.S. cents.[3] "Australian dollar trade remains within a narrow 70 U.S. cent to 73 U.S. cent range," said ANZ economist Amber Rabinov.[3] "Worse than expected releases of (US) retail sales, international trade and labour force data could trigger a sell off towards 70.70 U.S. cents, and then lower to 69.50 cents if the negativity takes hold," Rabinov said.[3] There are no major economic releases expected today though U.S. Pending Home Sales data will come out at 10:00 AM EDT.[8]
Trading could become choppy as we approach the end of the week because of the U.S. Non-Farm Payrolls Report on Friday. Based on how much the equity markets have recovered because of better than estimated economic news, this could be called the biggest report of the year.[1] Although China's manufacturing sector posted a gain for the first time in nine months, it is going to take a lot more than a bullish economic report from another country to get the New Zealand economy rolling.[1] Reports on Friday showed U.S. consumers felt more upbeat about the economy in April while a key guage of manufacturing suggested the sector was gradually emerging out of a deep slowdown.[5]
Traders were optimistic about a recovery in the Australian economy because of the overnight news that Chinese manufacturing increased for the first time in nine months.[1] News of a recovery in China 's economy could lead to increased demand for Australian exports.[1]
In economic news, the average asking price for a house in Australia was down 2.2 percent in the first quarter of 2009 compared to the previous three months, the Australian Bureau of Statistics said today.[11] The annual inflation rate in the National Capital Region slowed down to 2.2 percent in April from 3.2 percent in March as the annual price adjustments in the commodity groups improved except in clothing and fuel, light and water, the data showed.[21] Core inflation, which excludes volatile fresh food and energy prices, was up 5.0 percent on year after the 5.6 percent gain in March.[21]
The high degree of leverage available in Forex trading means that small price movements will have a much greater impact on account performance and can result in large losses as well as gains. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Investment Group, LLC, or its subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions or technological issues may make it impossible to execute such orders. Strategies using combinations of options and/or futures positions such as'spread' or'straddle' trades may be just as risky as simple long and short positions.[1] Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions.[1]
Recently rangebound forex trading markets have left our currency signals at somewhat of a disadvantage through recent trade, but continued volatility suggests that short-term ranges could give way to sharper breakouts. [10]
Currency trading worldwide was at a fairly low ebb Monday due to holiday market closures in the U.K. and Japan, and the illiquidity may have led to exaggerated price movements.[18] Trading volumes are expected to be low today as Britain celebrates May Day and the Japanese markets are closed for the Golden Week holiday.[8] Trading is expected to be thin in Asia, with Japan shut until Thursday for Golden Week holidays.[4]
Holidays in Japan and the U.K. and a scarcity of market-moving data have kept trading constrained in the overnight session and in early North American trading Monday.[20]
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors.[2] You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.[1]
Ailing U.S. auto giant Chrysler's decision to file for bankruptcy for rehabilitate itself prompted dollar buying in Asian trading on Friday, with Italy's Fiat promising to help the U.S. company. [3] TAIWAN DOLLAR: The Taiwan dollar finished the week at 33.233 to the U.S. dollar, up from 33.711 a week earlier.[3]
Data showing signs of improvement in the euro zone, the U.S., China and India helped lift European shares 0.5 percent.FTEU3, pushing the euro to a 3-week high against the yen.[14] Arguably the ¥100 level of the yen could be seen as a point at which investors are repelled either way from the yen. That price is deemed neutral and investors will come down heavily chasing the yen rapidly higher or lower away from that point. The U.S. will deliver its own non-manufacturing ISM survey Tuesday, which will still display contraction.[9] Risk aversion around the globe encourages investors to buy the yen and therefore exacerbate the domestic crunch.[9]
Investors' reaction to a slower pace of contraction will likely be key. The euro is weaker to start the weak following a European Commission downgrade to the Eurozone's growth prospects over this year and next. They now expect a 0.1% slowdown in 2010 hitched to a 4% rate of contraction this year.[9] The euro come under some selling pressure after Axel Weber, a member of the European Central Bank Governing Council, said German gross domestic product is unlikely to rise before the second half of 2010, as the country is mired in the sharpest recession since World War II.[20] The euro could see major volatility on Thursday though, as the European Central bank will meet.[7]
The British pound lost ground against the commodity dollars and European currencies on Monday, and while pairs like GBP/USD and GBP/JPY managed to gain, they were not able to break above key resistance at 1.5070 and 149.00/90. [7] The won will gain 12 percent to 1,150 per dollar by the end of the year, David Mann, a Hong Kong-based senior foreign-exchange strategist at the bank, forecast in a research note on April 30.[15] '''Foreign fund flows have been strong. We think this trend should continue next week.''' Taiwan'''s dollar strengthened 1.4 percent this week as China ended a ban on investments in the island following an agreement to open cross-border operations for financial-services companies and more than double the number of direct flights.[15] The currency appreciated 2.1 percent last month, following an advance of 3.1 percent in March. China Mobile Ltd., the world'''s biggest phone company by subscribers, this week said it will buy a 12 percent stake in Far EasTone Telecommunications Co., Taiwan'''s third-largest phone company, for NT$17.8 billion ($541 million).[15]
'''The risk-taking culture should return and that'''s positive for the ringgit as well as the regional currencies.''' The ringgit strengthened 0.8 percent this week to 3.5585 per dollar. Elsewhere, the Philippine peso gained 0.1 percent this week to 48.360 versus the greenback and the Thai baht rose 0.3 percent to 35.30.[15] We'''ve passed the eye of the storm and while it'''s still bumpy and uncertain, the worst is probably behind us.''' The won surged 4.7 percent this week to close at 1,282.95 per dollar in Seoul, according to data compiled by Bloomberg.[15]
The rupiah climbed to a six-month high against the dollar on Friday after the Jakarta Composite Index of local shares surged 20 percent in April, the best month in a decade.[15] The rupiah climbed 2.1 percent to 10,610 and Taiwan'''s dollar rose 1.3 percent to NT$33.233.[15] The S&P; futures rose 0.3 percent, indicating a firm start on Wall Street later and Asian stocks rose to a seven-month high.[13] U.S. equity futures are also higher on the back of positive manufacturing news in Asia and the subsequent rally in the Asian stock markets.[8] Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms.[14]
Twenty countries have confirmed cases of swine flu, making a WHO declaration of a pandemic imminent. This news does not seem to be having a broad impact on global risk taking. [8] This week has more potential for shaping longer-lasting currency direction than any week this year. We say this because of the market's fascination with the perceived turning point for global growth, which received a further stroke earlier today from a private Chinese survey.[9] The rally in the Yen was a surprise as strong equity markets usually trigger renewed interest in the carry trade. This occurs when traders borrow the lower yielding currency to invest in higher yielding assets. Technically this market is being draw into retracement zone at.98.53 to 99.22. This area represents a major decision point for most traders.[1]
The market will start to look towards next Thursday when the ECB will most likely announce a 25 basis point interest rate cut.[2] Look for the continued threat of deflation coupled with a renewed appetite for risk aversion to continue to pressure the USD/JPY currency pair as it pushes above 100.[2] Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency.[1] The currency faces minimal event risk over the next two days, which could leave the door open for EUR/USD to climb toward the 200 SMA at 1.3507.[7]
SINGAPORE DOLLAR: The dollar was at 1.4747 Singapore dollars from 1.4960 the week before. SOUTH KOREAN WON: The South Korean currency strengthened against the dollar this week to close at 1,282.00 won, up sharply from 1,343.20 a week earlier. [3] The yen traded at 99.17 a dollar after dropping to a two- week low of 99.58 on Friday. It declined to 132.07 per euro on Friday, the lowest since April 14.[15] The aussie that has appreciated more than 9 percent against the yen after hitting a 4-week low of 66.88 on April 28 is currently trading near 73.3.[11] The People's Bank of China allows a trading band of 0.5 percent on either side of the midpoint.[3]
About: Brewer Investment Group, LLC, headquartered in Chicago, has among its subsidiaries a full-service introducing broker and a forex broker, each of which offers self-directed trading, broker-assisted trading and managed account programs. Brewer is committed to customer service, investor education and electronic innovation in order to respond to the constantly changing needs of its clients.[1] Gains were tempered today because of the thin trading conditions and also because of the lingering contraction in the U.K. economy and its widening budget deficit.[1] Volatility Percentile - The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 30 days of trading.[10]
On month, annual price additions in April were slower in all the food groups except for fruits and vegetables whose annual inflation rate was higher at 7.5 percent from 5.6 percent. Higher prices of selected food items such as fish, miscellaneous food, rice, meat, corn and dairy products were observed during the month.[21] The nation'''s industrial production increased 4.8 percent in March from the previous month, a third straight gain, according to a government report released on April 30.[15]
Much of Europe is closed today for vacation, while Japan descends into Golden Week in respect of the aged. We can expect to see rising unemployment a feature for the U.S., Canada and Australia throughout this week although based upon data refuting further economic weakness it's less likely that the pace of job losses will accelerate. That doesn't mean that joblessness won't continue rising through year-end. [9]
SOURCES
1. Weaker U.S. Dollar Drives Commodity Currencies Higher - Forex TV
2. The Canadian dollar touched a four month high against the greenback
3. SGGP English Edition- Asian currencies mainly up against dollar
4. FOREX-U.S dollar hurt by a surge in risk appetite | Markets | US Markets | Reuters
5. FOREX-Yen, dollar lose ground on better risk appetite | Currencies | Reuters
6. Dollar: Quiet start of the week - Forex News | IBT FX Center
7. US Dollar, Japanese Yen Fall as Risk Appetite Lifts Carry Trades, S&P; 500
8. The dollar is slightly stronger this morning against a basket of major currencies
9. Monday FX View: Tedious Start to a Big Week -- Seeking Alpha
10. Forex Strategy Outlook: Dollar Mired in Range - What's Next?
11. RTTNews - Latest Earnings,Upcoming Earnings, Pos Pre Announcements, Pos Pre Announcements , Positive Surprises, Negative Surprises, Hot Stocks, Stock Split Calendar, Stock Buybacks, Dividends, Negative, Positive PreAnnouncements,Surprises .
12. Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
13. FOREX-Yen, dollar fall, Aussie scales 7-month highs | Markets | US Markets | Reuters
14. FOREX-Yen, dollar fall on rising shares, better data | Reuters
15. tehran times : Asian currencies gain, led by won, rupiah, as recession eases
16. FT.com / Companies / Financials - Equities boost hurts yen and dollar
17. Dollar's Fate Rides on Appetite for Risk - WSJ.com
18. Article - WSJ.com
19. Article - WSJ.com
20. Article - WSJ.com
21. RTTNews - Forex News top stories, Forex Trading, European Market Update, Currency Market Update, Forex trading.
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