Dollar at Two Week Low vs. Euro
A slight rise in risk appetite has affected many currency exchange rates. The dollar was at a two week low against the euro. Presently the euro to dollar exchange rate is $1.3328 a 1.3% loss against the dollar. The Japanese Yen fell against all major currencies as investors bet that the worst of the global recession is over. The euro to yen rate fell 1.9 percent to 129.17 per euro.
Higher Yielding Currencies
Other exchange rates affected by the rise in risk sentiment include the Australian, Canadian, and New Zealand dollars and the Norwegian Krona. US dollar exchange rates were also affected by a report which showed a drop in US GDP. The US economy declined by 6.1% in the first quarter of 2009 a larger than expected drop. The Kiwi dollar gained 3.2% against the US dollar and 3.8% against the yen.
Euro to Dollar Volatile
The euro to dollar exchange rate has a long history of volatility. In early March the dollar fell 3.4% against the euro as investors bet that the decision by the Federal Reserve to purchase $300 billion in Treasuries would hurt the dollar. The drop was the largest since the introduction of the euro in 1999. The dollar has gained 1.2% since early March.
Pandemic Fears Affect Currency Trading
Earlier in the week concerns about a possible swine flu pandemic helped the dollar to euro exchange rate as safe haven demand rose. The WHO raised its pandemic alert but did not recommend any border closings or travel restrictions. Concerns about the health of US banks also affected currency exchange rates earlier in the week. Investors and forex traders are awaiting for the results of US banks ‘stress tests’ due to be released early next week.
Investors Watching ECB and Fed
Other factors expected to affect currency exchange rates include the results of the ECB meeting and any change in policies by the Federal Reserve. In the coming week forex investors and traders will have several sets of economic data to sort through all of which can affect global currency exchange rates.
Improved Risk Sentiment Sends Euro Higher
A small change in forex investor sentiment sent the euro higher Tuesday as US housing and consumer confidence data affected currency exchange rates globally. Gains by the euro were pared by concerns about the US banking sector and fears of a global influenza epidemic. US consumer confidence rose to its highest in 2009 in April affecting the dollar to euro exchange rates.
Citigroup and BOA May Need Fresh Capital
Other factors affecting currency exchange rates included a report by the venerable Wall Street Journal that US bank regulators said that both Citigroup and the Bank of America may need more capital based on ‘stress tests’ conducted to see whether banks have the ability to withstand the current economic crisis. Citigroup is currently engaging in talks with the US government and insiders said that the bank does not expect the government to provide fresh capital.
US Banking Sector Raises Concerns
The Japanese Yen rose to a seven week high against the euro and gained against the dollar due to concerns about the US banking sector. Tuesday’s trading saw the dollar to yen exchange rate at 96.56 while the euro to dollar exchange rate is hovering around $1.30.
W.H.O. Raises Pandemic Alert
Also affecting currency exchange rates was the announcement by the World Health Organization that it was lifting its pandemic alert to phase 4 although no travel bans or border closings were announced. A less than expected drop in the decline of US home prices affected currency exchange rates and many investors see the report as a sign that the housing market has bottomed out.
ECB May Adopt Quantitative Easing
The euro to dollar exchange rate was also affected by an announcement by an ECB official that the central bank may engage in quantitative easing putting pressure on the euro. The ECB is expected to announce new measures to address the recession after its meeting in early May. Investors will have a slew of data to sift through this week and 19 reports are due from the US between April 28th to May 1st all of which could affect currency exchange rates and forex markets.
Euro Gains For Fourth Straight Session
The euro rose against the dollar for the fourth straight session causing a significant change in the euro to dollar exchange rate. Improved German investor sentiment prompted many to believe that the worst of the recession in Europe is over. A stock rally improved investor sentiment and also affected the euro to dollar rate. Worries about the health of the US auto industry also put pressure on the dollar.
UK Economy Contracts
The dollar is widely seen as a safe haven by forex investors when economic news is bad and increased risk appetite traditionally puts pressure on the US dollar. On Friday the euro to dollar rate rose 0.7% to $1.3245 after rising as high as $1.33. The euro to pound rate stands at 91 pence, a two week high. Data showing that the UK’s economy posted its largest contraction in 30 years put pressure on the Pound. On Friday the pound to dollar exchange rate was at $1.4661, a decline of 0.4%.
Economic Decline Slowing
The euro to dollar rate declined slightly after the US Federal Reserve announced that US banks must hold substantial amounts of capital beyond those required by regulation. Some economists believe that stocks could decline in the days ahead if any banking troubles surface. Finance leaders from the G7 group of nations stated that economic decline was slowing helping to bolster the euro to dollar rate.
Busy Week Ahead
In coming weeks the euro to dollar rate is expected to be affected by the slew of economic data coming from Europe and the US. Earlier in the week the ZEW report from Germany had a positive effect on the euro to dollar exchange rate. While many see the worst of the recession declining, this week’s performance by stock markets could be an indicator of things to come in forex markets.
Popularity of Online Forex Trading Grows
In recent years the popularity of online forex trading has grown. The ease and convenience of trading stocks online is in part responsible for the popularity of online forex trading. Online forex traders come from around the globe and online forex trading is now available in almost every conceivable language.
Forex Exchanges Volatile
Forex trading online is easy and can be done 24 hours a day six days a week. When one exchange closes another exchange in another part of the world opens. Day traders have become commonplace and the rewards can be great. Online forex trading is not for the faint of heart. During the current global recession currency markets have been extremely volatile and risk sentiment changes almost daily.
Online Forex Trading Challenging
While online forex trading may be easy, making money in currency markets can be challenging especially for the inexperienced. Forex is a zero sum game which means that every time a trader realizes a profit another trader loses. Forex trading online requires a combination of characteristics, education, patience, and discipline. Online forex traders must familiarize themselves with global economics and must pay close attention to the economies of the countries whose currencies they are trading.
Education Is Paramount
For those trading euros online it is wise to familiarize themselves with the various national economies of Euro Zone nations and should follow news from the European Central Bank. This will provide the online forex trader with clues how the currency is likely to perform. Online forex trading also requires the ability to follow stock markets and how they affect currency markets.
Online Forex Trading Available to the Average Investor
Forex trading was once the domain of the very wealthy but the development of the internet made online forex trading instantly available to the average investor. Online forex trading also allows the use of larger leverage than is available in stock markets. The average online forex trader can easily control a bloc of currency worth $100,000 with a $10,000 investment.
While online forex trading can be risky the rewards can be great. The fact that online forex trading can be done from the comfort of one’s own home adds to its attraction. For those willing to educate themselves the time has never been better to start online forex trading!
Dollar and Yen Gain on Banking Concerns
Forex traders noted that the US dollar and the Japanese Yen gained on Tuesday as concerns about the health of the financial sector sent forex traders and investors seeking the safe havens of the Yen and Dollar. Monday’s fall on Wall Street sent Asian markets down which benefited both the Dollar and Yen. Forex traders sought safe haven and pocketed profits from earlier trading of the Euro and high yielding currencies.
Reserve Bank of Australia Cuts Rates
The Australian dollar rose after the Reserve Bank of Australia cut rates by 25 basis points to a record low of 3.0%. Last week the Aussie dollar achieved a three month high against the dollar and a five month high against the Yen as Forex traders and investors took advantage of opportunities offered by the currency.
Buybacks For Dollar and Yen
The Aussie fell on Tuesday as warnings about the financial sector sent stocks down and bolstered the demand for US dollars and Yen. Mitsuru Sahara of Bank of Tokyo-Mitsubishi stated, “With the uptrend of the Aussie, market players were looking for chances to buy on the dips. So after the uncertainty factor got cleared away, they were comfortable buying back the currency. There is demand for the Aussie from those who want to bet on the economic recovery.”
BOJ Leaves Rates Unchanged
Forex traders noted the Bank of Japan’s decision to leave rates unchanged at 0.1%.The BOJ also revealed further steps to address the current credit crunch as Japan’s economy experiences the worse recession since the end of World War Two.
IMF Projects $4 Trillion in Toxic Debt
The health of the banking sector has long been a concern of forex traders and investors. The UK based Times said that the International Monetary Fund is suggesting that over $4 trillion in toxic debt has been racked up by banks and insurers. The report and other banking concerns have dampened risk sentiment for forex traders.
For now many forex traders are watching equity markets in advance of the long Easter holiday. Hopefully the performance of equity markets will signal a return to risk appetite.
ECB Fails to Cut Rates as Much as Expected
Forex traders noted that the European Central Bank failed to cut rates by the expected 50 basis points. The EC cut rates by only.25% and failed to adopt any non conventional measures to address the severe European recession. Forex traders will now have to wait until next months ECB meeting to see whether the ECB will intervene in credit markets. ECB President Jean-Claude Trichet refused to rule out the possibility of further rate cuts leaving forex traders and analysts puzzled over the small rate cuts.
ECB Selectively Interpreting Data
Forex trading websites expressed concerns that the ECB is falling far behind the curve in taking the necessary monetary actions to relieve financial and forex markets. Some forex traders believe that the ECB is selectively interpreting economic data in order to derive a more positive economic forecast. This seems not likely as ECB President Trichet has said that recovery is unlikely to take place before 2010. Many forex traders believe that if the ECB fails to drop rates and take other measures the result will be a prolonged decline in Euro Zone economic activity.
Yen Regains Losses
Forex traders have been taking advantage of the rise in risk sentiment that occurred after the G 20 summit in London. The Yen reached a six month low against the US dollar and the Euro as Forex traders sold the Yen in response to a rise in global stocks. As stocks fell on Monday’s trading the Yen regained some of its losses against the dollar and rose vs. the Euro. Greg Salvaggio of Tempus Consulting stated, “When equities move up, euro/dollar goes higher, and when stocks move down, euro/dollar goes lower. But the dollar’s gains versus the euro are nothing to get excited about. The euro is consolidating between $1.31 to $1.36.”
Several US Reports to be Released This Week
Forex traders are waiting for US reports on wholesale inventories, trade, and import prices which are due this week Forex traders and analysts said that forex markets remain vulnerable to swings in risk sentiment and that assumptions that the worst of the credit crisis is over may be premature.
US Non Farm Payroll Report
On Friday the US non farm payroll report was not as bad as expected and triggered a return to risk appetite. The US dollar rose against the Japanese Yen but remained little changed vs. the Euro. Forex traders noted that previously the dollar had fallen due to a smaller than expected rate cut by the European Central Bank.
US Loses 663,000 Jobs in March
Data in the US report showed that 663,000 jobs were lost in March and the unemployment rate was 8.5%, a 25 year high. Matt Esteve of Tempus Consulting stated, “It’s a pretty awful number but it was almost to be expected. There seems to be no bottom in the U.S. job markets yet, but other recent economic indicators have been better than expected.” The Dollar rose above 100 Yen and many forex traders noted the dire condition of the Japanese economy.
Dollar and Yen Under Pressure
In recent global forex trading both the US dollar and the Yen have been under pressure as forex traders and investors sought the opportunities offered by higher yielding currencies. Recent gains in stock markets eroded the safe haven appeal of the dollar and Yen. Online forex traders reported an increase in activity as investors switched forex strategies.
Dollar Up Against Yen
The dollar rose 0.8% against the Yen reaching a five month high against the Yen. Risk sentiment rose among forex traders after the G 20 summit in London. The US announced new accounting regulations designed to help troubled banks which helped to heighten risk sentiment among forex traders and investors.
Risk Appetite Higher
The rise in stock markets has also helped to boost risk sentiment among forex traders. Some economists and forex traders believe the world economy has bottomed out and see signs of recovery. Others are not so sure. Vassili Serebriakov of Wells Fargo stated, “There had been a degree of enthusiasm that perhaps the world economy has seen the worst, and the jobs data tempered that enthusiasm a bit.”
Traditionally any rise in risk sentiment creates forex opportunities for traders. Hopefully this trend will continue.
Possible GM Bankruptcy Causes Concerns
The US dollar and the Japanese Yen rose on Wednesday as forex traders and investors feared a bankruptcy of US automakers GM and Chrysler. Bloomberg reported that the Obama administration sees bankruptcy as the best way to go for General Motors. The Yen and the Dollar declined after a US official said the President’s position has no changed and the Bloomberg report was inaccurate.
Future of Chrysler Raises Concerns
A senior trader at a major Japanese bank stated, “The report about Chrysler’s possible bankruptcy is now impacting the whole market. U.S. stock futures are looking terrible after a positive close in New York, prompting market players to dump currencies they had bought against the yen.”
Euro Down Against Dollar
Forex traders noted that the dollar index (DXY) was at 85.850, a rise of 0.4% but short of an earlier high of 85.940. The Euro was down 0.4% in global forex trading and traded at $1.3193 vs. the US dollar. The Euro fell 0.7% against the Yen to 130.29 Yen. Forex traders also noticed that the dollar fell 0.1% against the Yen and traded at 98.85 Yen.
The dollar had traded at 99.48 Yen the highest since March 5th when a Bank of Japan showed that confidence among Japanese manufacturers had fallen at its most rapid pace ever. The survey showed the distress Japanese exporters are experiencing during the current global recession.
High Yielding Currencies Affected
Forex traders and investors noted that many high yielding currencies are being affected by the rise of risk aversion. The Aussie dollar which had provided forex traders with forex investment opportunity declined after data showed that Australian retail sales fell to a nine year low. The New Zealand dollar which had also performed well in global forex trading fell after New Zealand’s central bank warned that the recent rise in interest rates was unwarranted.
Risk Aversion Back
Risk aversion has returned once again and forex traders and investors are seeking the safe havens of the US dollar and the Japanese Yen. Forex trading in volatile markets is difficult at best and the back and forth between risk aversion and risk appetite makes forex trading even more difficult. Despite all this forex markets remain the world’s largest and provide forex traders with opportunities no matter how badly other markets perform.
