Pound Pressured by Deficits

Last week was not a good one for the pound which fell broadly against the dollar. Investors concerns about the growing size of British deficits pressured the pound in currency markets. At a summit of asset managers several participants said the pound is their ‘least favorite’ currency and predicted the pound will be used to finance carry trades in 2010. Chancellor of the Exchequer Alistair Darling told British lawmakers that the UK’s budget deficit will hit 611 billion pounds ($990 billion USD) during the next four years. He also said the UK economy would shrink 4.75% in 2010. Earlier in the week Moody’s Investor Service had said that Britain’s finances would “test the Aaa boundaries” of the country’s rating due to rising deficits and debt concerns. Robert Stheeman, CEO of U.K.’s Debt Management Office said a day later that he was “not unduly concerned” about the possibility of a cut in the nation’s credit rating.

Gold Hits Four Week Low

On Friday gold hit a four week low, reversing recent gains as positive US data sent investors in search of riskier assets. Gold prices ranged from $1,143.40 to $1,110.20 the lowest since November 13th. Gold was pressured by the dollar’s rise against the euro and positive US retail sales and consumer sentiment data. The US  retail sales report showed the largest advance in US retail sales since August although some attribute the spike to seasonal and holiday buying.

Loonie Pressured by Weaker Gold, Oil Prices

The data pressured the Canadian dollar which fell almost a full cent against the greenback. The US dollar’s rise contributed to weaker gold and oil prices which are key Canadian exports. Steve Butler of Scotia Capital Stated, “It’s starting to look like strong U.S. data is good for the (U.S.) dollar. Certainly the market reacted quickly and bought dollars. The sentiment has turned in favor of the U.S. dollar and Canada’s is weakening off on the back of that.” Investors will be watching for UK Jobless Claims which are expected to be modest and are hoping that UK jobs data will meet optimistic expectations.

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 Gains on Recovery Momentum

The US dollar hit a one month high against most major currencies on Friday (Dec. 11) as retail sales gains and increased consumer confidence prompted investors to speculate that the US Federal Reserve will raise rates earlier than expected. Earlier in the week Fed Chairman Ben Bernanke said that Fed rates would remain low for an ‘extended period.’ The yen fell as evidence of economic recovers spurred demand for riskier assets. Positive Chinese economic data helped to lift stock markets in Asia, Europe and the US. US retail sales rose 1.3% in November as consumers spent more on a wide range of products and goods. Boris Schlossberg of GFT Forex said, “This is another notch in the belt for the recovery bulls. It is really an unexpectedly powerful number. The report also confirmed what we saw overnight, which was very good Chinese data, suggesting that global recovery is gaining momentum.”

Asset Managers Say Pound is Least Favorite Currency

In an interesting development asset managers at a Reuters Investment Summit in New York said that the British pound is their least favorite currency. They said the pound has been damaged by tax increases, low rates and spending cuts. A luke warm recovery in the UK is expected to keep rates low. Rates now stand at 0.5% and on Thursday the Bank of England announced that rates would remain low and that the asset purchase program would remain under review. Bob Doll of BlackRock Inc stated, “The last to raise rates are supposedly the U.S. and the UK. Until then, with rates zero, it’s hard enough to think that the carry trade won’t continue.”

Aussie Kiwi Benefit From Carry Trades

Fund managers pointed out that the chief recipients of carry trades have been the Aussie and Kiwi dollars. Australia was the first of the G7 nations to raise rates. Australian rates are now at 3.75%, the highest in the industrialized world. New Zealand has not raised rates from the current 2.5% but the New Zealand central bank has indicates it would raise rates sooner than expected.

Knowledge of the foreign exchange market allows traders and investors 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. The world currency trading market is the world’s largest and about $4 trillion dollars in currencies are traded every day. Because currency markets are open twenty four hours a day, there are incredible opportunities to make a profit.

Fitch Downgrades Greece’s Rating

The move followed a report by Standard and Poor’s that said Greek banks faced Europe’s biggest risks. Dubai concerns lingered after a report said that Dubai World could expect no ‘meaningful’ help from the Dubai government. The decline in risk sentiment lifted the dollar as traders and investors unwound carry trades involving the use of low rate US currency to purchase higher yielding assets. Risk appetite has already been dimmed by Fed Chairman Bernanke’s remarks who said that the US faces a prolonged recovery and that the Fed would keep rates low for an ‘extended period.’

Bernanke Says Fed to Keep Rates Low

Bernanke’s remarks dampened speculation that the Fed would raise rates sooner than 2010. The speculation was prompted by last Friday’s US non farm payrolls report that showed that US employers cut fewer jobs than expected. Markets had speculated job losses of 130,000 for November and the report showed only 11,000 job losses for November, fewer than since the global recession began. Friday’s jobs data and the dollar’s rise had prompted speculation that the yen would become the preferred source of funding for carry trades. Michael Woolfolk of BNY-Mellon in New York stated, “We’re in a period of dialing back risk, though I still think there’s a material amount of risk appetite out there.” He also said the dollar would continue to struggle until the Fed signals it is ready to raise rates.

Premature Optimism

Against the euro the dollar traded at $1.4842 after Monday’s one month low of $1.4756. The dollar traded at 88.84 against the yen, a decline of 0.8%. Jun Kato of Shinkin Central Bank Research Institute had this to say about last week’s premature optimism, “It was unreasonable that U.S. non farm payrolls for a single month alone raised such optimism, as concerns persist over Dubai debt problems and the U.S. banking sector is not necessarily in good condition.”

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.

Figures Much Better Than Expected

The US dollar rose on Friday after better than expected non farm payroll figures showed that the US lost 11,000 jobs in November far less than the 130,000 that had been predicted by experts. The US jobless rate fell from a 26 year high of 10.2% to 10%. The surprisingly positive report prompted speculation that the US Federal Reserve my have to raise rates from present levels of near zero. The dollar is on track to hit a three week high of 90 yen and the euro fell below $1.50. Fabian Eliasson of Mizuho Corporate bank stated, “A jobs recovery is the last piece of the puzzle before we can say we’re in full recovery, so it raises the question that maybe rates will go up sooner rather than later. That’s pushed the dollar higher.”

Jobs Data ‘Too Good to be True’

The US has suffered four straight quarters of economic decline and has lost more than 7 million jobs since 2007. Eliasson said the jobs data is “almost seems to good to be true.” Eliasson stated that initially he thought the figures were a misprint. The dollar vs. yen rate was up 1.6% to 89.60 yen and the euro fell 0.9% and traded at $1.4913. The yen has been pressured by an announcement by the Bank of Japan which said that the central bank will initiate liquidity boosting programs to fight deflation. Low US rates have prompted investors to use dollars for carry trades and the Federal Reserve has said that rates are likely to remain low well into 2010. Assessing the situation Mizuho’s Eliasson stated, “But if (signs of a job recovery) continue, you may start to see the dollar rally on strong data rather than the opposite.” Many analysts believe the yen will replace the dollar for funding carry trades.

China Will Keep Dollar As Foreign Reserve

The dollar was also boosted by statements by Chinese officials who said that the US dollar will remain the anchor of China’s foreign exchange reserves. Earlier China had expressed concerns about mounting US deficits and had discussed replacing the dollar as a reserve currency. Chins has expressed concerns about the weak US dollar.

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BOJ Actions Pressure Yen

The dollar held recent gains despite a rise in stocks and commodities. The Bank of Japan said on Tuesday that it would provide 10 trillion yen ($115 billion USD) at a rate of 0.1% to stem deflation and prevent another recession in the already troubled Japanese economy. The Japanese government is expected to provide a stimulus package to shore up the economy. Barclays Capital’s Yamamoto stated, “The focus now shifts to the government and the size of the supplementary budget and whether there will be any action by the Ministry of Finance in the foreign exchange market.”

UK Emerging From Recession

The pound held on to yesterday’s gains against the US dollar and rose against the weak yen. Bank of England chief economist Spencer Dale said that the UK economy is emerging from the recession but cautioned that a number of factors could hinder recovery. He also said that stimulus programs combined with a weaker pound have supported recovery and said that credit is likely to remain tight. The Bank of England will hold its next policy meeting on December 10th. Many traders and investors are waiting for the results of the European Central Bank meeting on Thursday. The bank is expected to keep rates at 0.1% and announce that December’s 12 month funding will be the last. Carsten Brzeski of ING Financial Markets said, “The meeting should witness the very first steps towards the exiting of super-loose monetary policy. Even though the prospect of rate hikes any time soon remains distant, the ECB will start gradually unwinding its non-standard measures.”

Upcoming Data

Traders will also be watching US job figures, due Friday, closely.  The report by Automatic Data Processing is expected to show that 155,000 jobs were lost in November compared with 203,000 jobs lost in October.

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UAE to Stand Behind Banks

The dollar continued its long term decline against other major currencies after the United Arab Emirates said it would stand behind local and foreign banks to relieve the Dubai World debt crisis. The yen also fell after the Bank of Japan announced they would intervene to mitigate the effects of a stronger yen which has hurt Japanese exporters. On Monday the dollar fell after Asian stocks rose after the announcement by the UAE which pledged support to regional banks and Dubai’s neighbor Abu Dhabi promised support to selected Dubai companies. The actions cooled demand for greenbacks which gained last week on concerns about Dubai’s debts. Dubai World eased investor fears on Monday with an announcement that it intends to restructure.

Japan’s Government Intervenes

The yen fell after the Bank of Japan announced measures to inject liquidity into the Japanese financial system and to keep three month rates at historic lows. Most major currencies strengthened except for the US dollar and the yen as stocks and commodities strengthened. Stephen Gallo of Schneider FX in London said, “The two primary funding currencies, the dollar and yen, are performing badly today versus non-quantitative easing currencies and higher-yielders. The moves by the BOJ caused a big shakeout of long yen positions, and a weaker yen has helped asset price movements elsewhere … as the weak yen to a degree — but maybe not as much as dollar — drives the risk trade.”

US Employment Figures Due This Week

The Aussie dollar was once again a winner and rose almost 1% against the US dollar to $0.9230 after the Reserve Bank of Australia raised rates to 3.75%. The euro gained 0.4% against the greenback trading at $1.5065 on Tuesday. This week the US will release its construction spending and pending home sales report and on December 4th the non farm payrolls and unemployment report will be released. Most analysts expect the reports to show a prolonged recovery for the US.

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.

Risk Aversion Returns

On Thursday the US dollar and the Japanese yen rose in the latest back and forth between risk appetite and risk aversion. Stock market declines sent investors in search of safe haven assets. The euro vs. yen rate dropped more than 1% and recent winners such as the commodity linked Aussie and Kiwi dollars fell. Many analysts see investors as becoming cautious in advance of the year’s end and the perception that recovery may be a long way off. Boris Schlossberg of GFT Forex stated, “We’re running out of gas as far as recovery momentum goes. People have started to take money off the table as we’re getting close to the year-end because they want to make sure they can lock in all the profits they had on the long side.”

Germany Faces Extended Recession

An economic advisor to the German government said in an interview with Reuters Television that Germany could face a double digit recession in 2010 and 2011 as the government withdraws stimulus measures. Many investors and traders see recent economic data as not living up to expectations and predictions. Steve Barrow of Standard Bank said, “There are some indications of a rise in risk aversion - stocks have come off, and there are slight concerns that a lot of data recently has not been living up to expectations.”

US Stocks Retreat

The euro vs. dollar rate fell 0.5% and the currency traded at $1.4884. Against the yen the dollar fell 0.7% to 88.77 yen. US stocks retreated and investors and traders were concerned by actions by the Brazilian and South Korean governments to limit hot money flows into their economies. The dollar index DXY rose 0.3% to 75.384 after hitting a fifteen month low early in the week. The Aussie dollar hit a two week low and fell 1% against the US dollar to US$0.9202. The Kiwi fell 1.9% to US$0.7319.

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.

US Unemployment at 10.2%

The US dollar fell against the Yen as US unemployment rose to 1.2% fueling speculation that the Federal Reserve will keep rates low well into 2010. The US unemployment rate is now at a twenty six and a half year high. The figures dampened hopes for a quick end to the ongoing recession that has plagued the global economy since early fall 2008. David Tien of Fischer Francis Trees & Watts stated, “Near-term, it adds to the uncertainty of the recovery, but it also reinforces how much longer we are going to need lower rates. It solidifies the outlook for plentiful liquidity going into the middle of next year.”

Commodity Based Currencies Gain

Once again commodity based currencies were winners in currency markets. The Australian dollar rose 0.6% to US$0.9166 while the New Zealand dollar rose 0.4% to US$0.7245. The Canadian dollar fell to 92.95 U.S. the lowest since November 3rd. Dismal employment figures from both Canada and the US prompted the declines of both currencies. US employers cut 190,000 jobs in October worse than most economists had predicted. The euro fell 0.2% against the dollar and traded at $1.4847. Some economists believe that the figures are not low enough to question global recovery but were low enough to keep US rates at record lows well into 2010.

Dollar Could Fund Carry Trades

The greenback was little changed against most major currencies. The widespread belief that the US will keep rates low has fueled speculation that the US dollar may replace the yen as the currency of choice to fund carry trades. Both currencies are widely seen as safe haven assets but the recent unemployment figures from the US have benefited the yen.  Samarjit Shankar of BNY Mellon stated, “The yen has obviously benefited … from risk aversion. The big psychological impact was from the 10.2 percent unemployment rate. It’s going to cast further doubt on whether the incipient U.S. economic recovery can be sustained without further government support.”

G 20 Conference This Weekend

The upcoming meeting of the G 20 finance ministers and central bankers takes place this weekend in Scotland and is sure to be the main focus among traders although currencies are not included in the formal agenda.

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 Rises on Banking Woes

The US dollar hit one month highs against other major currencies on Tuesday as banking woes and weak stocks dampened risk appetite among investors. Stocks fell on both sides of the Atlantic and concerns about the health of several UK banks prompted risk aversion. Banking giants UBS UBSN.VS posted disappointing results and UK banks Lloyds and Bank of Scotland underwent shake ups. Adding to the banking sector’s woes the European Commission said that stress tests of Euro Zone banks showed that losses could reach 400 billion euros ($590.9 billion USD) Omer Esiner of Travelex Global Business Payments stated, “We saw investors focus once again on the health of the banking sector. Stocks were generally lower and that has rekindled demand for safe-haven, low-yielding assets like the dollar and the Japanese yen.”

Euro Zone Bank Losses Projected

The ICE Futures U.S. dollar index .DXY rose 0.4% to 76.580, the highest since early October. The euro vs. dollar fell 0.8% to $1.4656. Analysts attributed the Euro’s decline to the European Commission’s estimate of Euro Zone bank losses in 2009-2010. The euro also dropped 0.8% against the Japanese yen and traded at 132.35 yen and the US dollar traded at 90.29 yen. During the current recession the US dollar has been seen as a barometer of risk sentiment among investors.

Investors Cautious

Investors remain cautious in advance of this week’s central bank meetings and the G 20 conference scheduled for this weekend. The meeting of the U.S. Federal Reserve starts on Tuesday and the European Central Bank will meet later in the week. On Friday the US jobs report is due. The Federal Reserve is widely expected to keep rates at near zero and most analysts believe this is unlikely to change in the near future. Andrew Busch of BMO Capital Markets stated, “I don’t think the Fed is going to be in a big hurry to do anything about interest rates going forward and certainly in their language I don’t expect any changes.”

Knowledge of the foreign exchange market, or forex, allows traders and investors 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. The world currency trading market is the world’s largest and about $4 trillion dollars in currencies are traded every day. Because currency markets are open twenty four hours a day, there are incredible opportunities to make a profit.

Aussie and Canadian Dollars Big Winners

Last week’s big winners in currency markets were the Aussie and Canadian dollars. Many currency experts think both currencies will achieve parity with the US dollar in the very near future. The Aussie’s rise reflects the performance of the Australian economy which is commodity based and expanding despite the global recession. The US dollar has suffered downward pressure due to concerns about massive deficits and uncertainty about the future of the greenback as a reserve currency. Jonathan Xiong of Mellon Capital stated, “We like the Australian dollar and that’s one of the recovery plays we have on.” He also stated that parity is “a possibility, but we don’t make forecasts on whether it will go to parity or a particular rate.”

Chinese Demand

The Australian dollar is the second best performer in currency markets behind the South African rand. The Australian economy has been fueled by A$20 billion ($18 billion) giveaway to consumers and increased Chinese demand for iron ore which Australia has in abundance. The Aussie dollar hit 92.70 U.S. cents, the highest since August 2008. The Aussie dollar has gained more than 50% from a five year low of 60.09 on October 27th 2008.

Loonie 4th Best Performer Against US Dollar

The Canadian dollar which was also on track to achieve parity with the US dollar has suffered a slight setback due to rising risk aversion. The Canadian dollar fell as General Electric and Bank of America posted dismal figures triggering a decline in investor risk sentiment. The Canadian dollar, affectionately called the ‘loonie, fell 0.3% to 96.44 U.S. cents on Friday. Against the US dollar the loonie was the fourth best performer after the Australian dollar, the Brazilian real and the Mexican peso. Better than expected Canadian employment figures reduced unemployment figures to 8.4%. Many Canadian officials believe that parity with the US dollar could slow Canadian recovery.

The fastest and easiest way to engage in forex trading is with the internet. Since the advent of the internet, currency trading has boomed. If you are just getting started with forex, you’ll definitely want to try out online currency trading forex. Online currency trading allows you to trade forex from the comfort of your own home and is a great way to get involved in the forex market.