Rally Not Sustainable

Last week’s rally in risk appetite has come to a screeching halt. Many economists had warned that the recent rally was not sustainable and that the ‘green shoots’ theory of economic recovery was premature. Despite positive US data investors remained concerned about economic prospects prompting a return to risk aversion and affecting global currency exchange rates.

Euro Zone Economy Contracts at Fastest Pace Ever

Investors and forex traders noted that the Euro Zone economy contracted at its most rapid pace on record. Dismal economic figures from Germany, the Euro Zone’s largest economy, affected the euro to dollar rate with the euro declining significantly against the US dollar. The euro to dollar rate fell 0.4% to $1.3581 and the euro fell 1.2% against the Japanese yen to 129.11. The euro is expected to reach its biggest weekly loss against the Yen since January.

Optimism Unrealistic

Markets seem to be rethinking economic predictions that point to economic recovery and this has affected currency exchange rates and forex markets. Greg Salvaggio of Tempus Consulting stated, “You certainly can make the argument that the market got a bit ahead of itself. Things are getting better. But the optimism the market priced in about 30 days ago, well, it was not realistic to be that optimistic quite that soon.” Salvaggio also predicted a euro to dollar exchange rate of about $1.3450-$1.3710 by next week.

ZEW Report Due Next Week

Should risk aversion continue experts predict the dollar will gain against commodity based currencies such as the Australian and Canadian dollars which have gained in currency markets recently. US housing data to be released Tuesday will be important to investors and will affect some currency exchange rates. The German ZEW report will be the most important piece of economic data to be released next week and could affect future ECB asset purchase decisions.

As usual a return to risk aversion benefits the US dollar and the Japanese Yen which are perceived as safe haven currencies. Next week’s trading is expected to be volatile.

Generally there are two types of options available to investors. Traditional options, which let the investor buy one currency of a pair with the other paired currency at a guaranteed exchange rate until the forex option expires, and single payment options, which allow the investor to predict a currency pair’s movement. The ability to trade forex options gives investors protection while allowing them to realize huge profits.

Dollar and Swiss Franc at Four Month Low

Both the US dollar and the Swiss Franc hit four month lows against a basket of currencies on Wednesday. Continuing risk appetite has put pressure on the dollar as safe haven demand fades. The dollar was pressured further by an article in the Financial Times that pointed out the risk of the US losing its triple A credit rating due to rising deficits. A forex trader for a Japanese bank stated, “I think the market overall wanted to test the (dollar’s) downside and the FT story linked well with that trend.”

Euro Up Against Dollar

The euro to dollar rate was up 0.2% from Tuesday at $1.3674 after hitting a seven week high of $1.3722. Confidence in money markets affected currency exchange rates as the LIBOR hit a record low of 0.906% on Tuesday. The dollar to Swiss franc exchange rate hit a four month low of 1.0977 and the dollar came under even more pressure after remarks by Japan’s opposition finance spokesman who said that Japan should avoid purchasing US bonds in dollars due to currency risks.

Dollar Index at Four Month Low

The dollar index hit a four month low of 81.871 .DXY further affecting dollar exchange rates. Optimistic remarks by Fed Chairman Bernanke stating that the results of bank stress tests were ‘encouraging’ and that the dollar is likely to remain the world’s reserve currency failed to help the US dollars exchange rate on forex markets.

UK Retail Sales Rising

The Pound to dollar rate was helped by figures that showed UK retail sales rising at the fastest rate in three years and house prices declining at their slowest rate in fifteen months. The ‘green shoots’ of economic recovery theory has dominated forex exchanges since last week. The buoyant mood in markets has had an effect on global currency exchange rates. Although some forex traders see the recent economic figures as “less catastrophic” and recommend caution the ‘green shoots’ theory is expected to dominate currency trading this week.

Knowledge of the foreign exchange market allows traders to make a profit by trading one currency for another. Those who wish to be involved in the world currency trading market should learn as much as they can about currency exchange and market rates by keeping up with current forex news. With approximately $4 trillion in currencies traded every day, there are incredible opportunities to make a profit.

European Shares Lower

The US dollar rebounded from a four month low on Monday as economic concerns sent forex investors to the safe haven of the dollar and yen. European shares fell pointing to a lower open on Wall Street affecting global currency exchange rates. Last week the perception that the worst of the global recession was over pressured the dollar as risk appetite rose. The dollar suffered multi month lows in last weeks trading as data from US banks stress tests failed to dampen risk sentiment.

Yen Rises on Safe Haven Demand

The Japanese Yen rose prompted by the decline in European shares which has affected both the euro to dollar and yen to dollar exchange rates. John Rivera of DailyFX stated, “The dollar has strengthened … as European equity markets and U.S. futures continue to trade lower.” He also stated that markets are focusing on economic fundamentals and this has affected both stocks and currency exchange rates.

Investors Cautious

Investors are also cautious in advance of US retail sales data due this week. The 8.9% US unemployment rate and the realization that the global recession is likely to be with us for quite some time has dampened risk sentiment on stock and currency exchanges. The euro to dollar rate was down 0.5% to $1.3580 after hitting a seven week high of $1.3670. Many economists and traders saw last week’s rally as premature. Lauren Rosborough of Westpac stated, “The market’s seeing a pullback from the overextended risk rally that occurred last week.”

No Near Term Events Expected

Some analysts say that with several risk related events such as the bank stress tests and US labor results a thing of the past investors remain somewhat confident. They also pointed out that there are few near term events to keep up the rise in risk appetite. Factors affecting currency exchange rates included the ECB meeting, the US non farm payrolls report, and remarks by Treasury Secretary Timothy Geithner.

Aside from the US retail sales data due this week no other significant economic data is expected. In all likelihood currency exchange rates will be mainly affected by stock market performance.

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US Banks Need Fresh Capital

The results of US banks stress tests were not enough to dampen risk sentiment among investors and rising risk sentiment has been affecting global currency exchange rates. The stress tests gauge whether the US’s largest 19 banks have enough capital to weather a deep recession. The stress tests revealed that Bank of America will need to raise $33.9 billion, Wells Fargo $13.7 billion, Citigroup $5.5 billion, and GMAC $11.5 billion. The banks will have to raise the needed capital in six months.

Yen Pressured

U.S. Treasury Secretary Timothy Geithner said that none of the 19 banks undergoing stress tests are at risk of insolvency which raised forex investor sentiment. The yen to dollar rate was affected as investors dumped the yen in favor of higher yielding assets. Akira Takeuchi of Chuo Mitsui Trust and Banking said, “The yen was sold, especially against higher-yielding currencies, as risk aversion fell on the view that the stress tests probably won’t be as bad as expected and on data that suggested the worst for the U.S. economy may be over.”

Stocks Rally

Stock markets rallied after the results of the stress tests were known affecting currency exchange rates. The dollar vs. yen rose declined 0.3% on Friday to 98.91 yen. The euro to dollar exchange rate was $1.3516 on Friday. Better than expected US job figures also boosted risk appetite and is seen as another factor affecting currency exchange rates.

ECB Cuts Rates as Expected

Actions to be taken by the European Central Bank have affected the euro to dollar exchange rate. The central bank cut rates to a record low and announced a plan to purchase covered bonds to stimulate credit markets and boost the Euro Zone economy. Some analysts caution that while things may not get worse recovery will be slow and painful.

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Markets Closed for May Day

Weekend trading was light due to the May Day holiday. Early Monday the euro to dollar exchange rate changed in favor of the dollar as investors await a slew of economic data due this week. The European Central Bank meets Thursday and is expected to cut rates at 1% and announce other measures to address the ongoing recession.

ECB Comment Affects Currency Exchange Rates

The euro to dollar rate was affected after ECB council member Axel Weber said that Germany would not see economic growth until the second half of 2010. The statement caused concerns among forex investors affecting currency exchange rates in advance of the ECB meeting. Safe haven buying changes the euro/dollar exchange rate in favor of the dollar.

Stress Test Results Postponed

The results of the stress tests of US banks has been postponed from Monday to Thursday and the combination of the ECB meeting and stress test results should make Thursday a volatile day for currency exchange rates. Mondays trading has been volatile despite the holiday closure of British and Japanese markets. The euro to dollar exchange rate was down 0.4% to $1.3218, paring earlier gains. The dollar to yen rate rose 0.3% to 99.40.

European Central Banks Meet

Several central banks meet this week and the results of these meetings are bound to affect currency exchange rates. Central banks meeting this week are Britain, Norway and Australia. Brian Kim of UBS predicted a busy week and stated, “This week is packed, with central banks, stress test results on Thursday, US employment data on Friday - a lot of different land mines that could trip people up.”

Signs of Improvement

While many investors are expected to remain cautious this week favoring the US dollar there have been other economic factors affecting currency exchange rates. Many analysts believe that the worst of the global recession is over. Signs of economic improvement in China, the US and India has recently lifted investor risk sentiment. This week will certainly be a busy one in currency exchange markets.

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May Day Celebrated in Europe and Asia

Forex trading is expected to be light this weekend as Europe and Asia celebrate the traditional May Day holiday. Also affecting currency exchange rates is the postponement of the release of US bank stress tests. Many investors remained cautious in advance of the stress test results and PR firms representing US banks have been working overtime to put a positive spin on what could be bad news.

Pandemic Concerns

Earlier in the week currency exchange rates were affected by concerns of a possible global pandemic and its effect on insurance companies and triggered a round of risk aversion. In mid week risk appetite made a return affecting the euro to dollar exchange rate. The euro gained for four straight sessions and the big winners were the Aussie and Kiwi dollars.

Fed Keeps Rates Same

The dollar to yen and the euro to dollar rates were affected in mid week by the Federal Reserve statement which said that interest rates would be kept at present levels and that the economic outlook showed slight improvement. Greg Salvaggio of Tempus Consulting said that the Fed is “noting modest signs of improvement and will keep the target at the present levels, as expected. For the currency markets, the Fed’s statement seems to be helping the dollar a bit, in particular against the yen.”

Slowing US Contraction

Better than expected figures showing a slowdown of economic contraction in the US prompted a rally on Wall Street which also affected currency exchange rates. By weeks end rising risk sentiment put pressure on the dollar and the Yen although some investors remain cautious about the health of the US banking sector.

Weekend Trading Thin

Recent economic data has led many to believe that the worst of the recession is over and has had an effect on global currency exchange rates. Investors were encouraged by increased Chinese industrial production and somewhat encouraging US job figures. Trading is expected to be thin during the May Day holiday weekend.

Generally there are two types of options available to investors. Traditional options, which let the investor buy one currency of a pair with the other paired currency at a guaranteed exchange rate until the forex option expires, and single payment options, which allow the investor to predict a currency pair’s movement. The ability to trade forex options gives investors protection while allowing them to realize huge profits.

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.

Knowledge of the foreign exchange market allows traders to make a profit by trading one currency for another. Those who wish to be involved in the world currency trading market should learn as much as they can about currency exchange and market rates by keeping up with current forex news. With approximately $4 trillion in currencies traded every day, there are incredible opportunities to make a profit.

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.

The best way to be a successful forex trader is to keep up with current forex market news. Keeping up with market fluctuations and exchange rates will help you to successfully navigate potential forex opportunities. Once you learn about forex, you’ll want to start using your knowledge to engage in live currency trading - so you can turn your forex knowledge into profit.

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!

If you have extensive knowledge of forex markets, you may want to trade forex futures. A forex future is an agreement to buy or sell a specific amount of currencies at a predetermined price on a set date in the future. Essentially those who trade forex futures are hoping to profit from a currency’s future fluctuations.

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.

Generally there are two types of options available to investors. Traditional options, which let the investor buy one currency of a pair with the other paired currency at a guaranteed exchange rate until the forex option expires, and single payment options, which allow the investor to predict a currency pair’s movement. The ability to trade forex options gives investors protection while allowing them to realize huge profits.