Risk Appetite Returns

A rise in European share prices brought about a return of risk taking for Forex traders and investors. The rise in European stocks and US stock market futures trimmed gains made by the Dollar earlier in the week. Forex traders also took advantage of emerging currencies which pressured the dollar against major currencies. The news that Citigroup was profitable during the first two months of 2009 had some forex traders speculating that the worst of the crisis in the US is over which also put pressure on the dollar.

Britain Adopts Quantitative Easing

The British Pound remained under pressure and fell to a 5 1/2 week low against the Euro. Recently Great Britain adopted quantitative easing designed to increase the money supply which put further pressure on the Pound. Robert Minikin of Standard Chartered in London stated, “The global risk aversion bid for the dollar may be ebbing a little bit with equity markets performing somewhat better. Dollar strength on the emerging crosses are also seeing a significant correction and that’s spilling over into the majors too.”

Decline in Chinese Exports

Forex traders got an unpleasant surprise from China as data showed a decline in Chinese exports in February which limited gains by the Euro. Data showing an 8.0% decline in German manufacturing also pared gains by the Euro. The Euro rose 0.3% to $1.2714. Forex traders including interbank fx traders took advantage of opportunities offered by emerging currencies. The Hungarian Florint rose by 1.14% and the Polish Zloty rose 0.60%.

Pound Low Against Dollar and Euro

The Pound stayed low against the Dollar and Euro as concerns among forex traders about the BOE’s policy of quantitative easing, the state of the British economy, and the stability of the banking system all put downward pressure on the Pound. The Pound traded at $1.3658 against the dollar, a six week low.

Risk Appetite Seen as Positive Development

The return to risk appetite by many forex traders is a positive development after last week’s volatility. Some of the new developments indicate that some of the policies taken by several governments to address the global recession are starting to have an effect.