Monday Market Update

The dollar was up against the yen in Asia today following rumours that Japanese institutional investors may move into dollar assets at the start of April die to the rise in U.S. interest rates.

Rising yields on US Treasuries will likely move big Japanese investors, such as life insurance companies, to move into U.S. assets to benefit from higher returns. The U.S. dollar hardened to Y92.61. But the ICE Dollar Index, (which monitors the US dollar against a basket of currencies), fell to 81.547.

Investors will be watching key U.S. economic indicators this week, and if they look good, the dollar could break through Y94 this week.

Watch out for the US personal spending data for February (1230 GMT). Any sunny figures could strengthen the dollar as many people have built in for poor figures on the back of the bad weather which kept people out of the shops and wrapped up warm at home.

EUR/JPY stood at 124.39 compared with Y124.10 last week and EUR/USDF was 1.3430 versus 1.3417.

The euro went up thks to the deal on the Greece bail out, but it slipped back later. It continues to have the jitters.

The Euro may well be up and down a bit like the proverbial´s drawers- it will depend heavily on whether the up and coming Greek bond auctions find hungry investors.

Euro hits 10 month low against the Dollar

The Euro has hit a 10-month low against the US dollar…. below $1.3300.

Markets are still jittery after Portugal’s debt was downgraded yesterday and with Euro leaders due to discuss a bail out for debt-stricken Greece.

The course of action is still undecided- Germany now wants the IMF to play a role (interestingly following Gordon Brown´s earlier line). The fact that Fitch Ratings downgraded Portugal’s sovereign debt yesterday did nothing to allay the fears over the stability of the currency. The bears are out!

The euro tanked below $1.33 on various trading platforms, its most southerly position since May 2009. It has recovered somewhat over the morning, as day traders cashed in their profits.

And the Chinese government is also stirring things up a bit, following a couple of days of Google bashing (after they decided to lift the censorship on Google.cn, or rather redirect it to Hong Kong along with those sandstorms from Beijing).
Chinese central bank deputy governor Zhu Min said the Greek debt crisis was just the start. ("Ouch"). But then, he does hold rather alot of dollars…..

The Euro was also down against the Swiss franc to the dismay of chocolate and watch makers. It hit a record low of 1.4230 francs yesterday.

EVERYONE LOVES UNCLE SAM.

Well not everyone, but the forex markets seem to be heading that way.The dollar index, which is a measure of the greenback’s performance against a basket of 6 other currencies, rose to 82.062, a 10-month peak.

Although the dollar lost traction by 0.2 % against the Japanese currency to 91.95 yen JPY, generally the direction is up.

Weekly Forex Markets Review

Euro Slips on Greece

Just when everyone believed a Euro bailout for Greece was a done deal the market was surprised by the German´s apparent U turn. The German government appear to have decided that planned aid for Greece was illegal and have stated the IMF should be involved financially not just in an advisory capacity.
What seems to have spooked the market more is the lack of unity and clarity. In the other camp from Germany are France the ECB and EC president Barroso, who has called for immediate help to be announced.

This weeks EU summit in Brussels has taken on more importance and the Greek PM Papandreou has set this as a deadline for leaders to complete some aid package.
One suspects the Germans are rightly concerned of setting some dangerous precedents which other indebted EU members may well follow in the months or years ahead.

The upshot was the Euro weakening almost 2 per cent against all but Sterling and having touched 1.3800 early in the week finished at 1.3525. For the time being The EUR/ USD has moved back to the lower end of the recent range. It remains to be seen if there is potential to push below the large resistance just above 1.3400 at this stage. Equity markets have continued to behave themselves but seem to lack much to push them on further at this stage.

Sterling which benefited early in the week from better than expected employment data, ( almost reaching 1.54 USD) eventually succumbed to the price action of the Euro finishing the week at USD 1.5015.

The Euro/US dollar has now been trading in a 3 per cent range since the beginning of February and should that break it will no doubt increase volatility.

Forex Weekly Update March 14 2010

Weekly Update

Posted on | March 14, 2010 | No Comments
Dollar and Yen decline as risk appetite continues to improve

The Yen and US dollar declined last week as optimism for recovery extended. World wide equity markets continued there recent improvements and the S&P is hovering around the January high of 1150.
Although losses for the dollar were relatively small ( around 1% against the Euro) the market still remains very short Euro/US dollar. Further gains in Equity markets or even consolidation may push the dollar even lower next week.
Technically the US Dollar index which pushed below 80 last week is close to level that might provoke a bigger mover.
In Euro/Us dollar terms a push through the 1.3850 level could see us back above the 1.40 level and begin a bigger squeeze on shorts:

Sterling was battered early in the week( just shy of 0.92 against the Eoro) after release of trade figures with the deficit hitting a 17 month high. However, it recovered during the week as attention turned the the dollar. Sterling remains vulnerable probably until the election and then even beyond. The lack of a credible plan on the deficit will eventually cause a major negative reaction both in Gilts and the Currency.

The Greek situations has taken a back seat with investors more convinced that they will do enough to be supported by Germany and France. Indeed there is more speculation that a European Monetary Fund will be set up which has helped the government bond markets in the other so called PIGS.
I firmly believe this is merely a temporary pause . Despite all the right noises it seems highly unlikely that sufficient budget cuts can be achieved ( Spain has already jettisoned plans to raise the retirement age from 65 to 67). Of course this may may take months to really surface but Ireland Spain and Portugal will find that tough talking alone will not help them.

Next week sees more data promising increased volatility,perhaps. Notably the German ZEW Survey (Economic Sentiment) and US inflation data.

If we were to see a sustained rally in equity markets and improved economic data together with the abovementioned lull in Euro tensions then just perhaps we may have seen a temporary high already for the dollar. For Euro/ shorts  and Yen and Dollar bulls it could prove very painful.

Weekly Update

Risk appetite improves on economic data and no Greek tragedy.

Generally positive Economic data encouraged equity rallies which helped arrest any further dollar rally and led to the Japanese Yen losing ground against most currencies. The Canadian Dollar and Australian Dollar led the gains against the yen as commodities rose, Crude oil closing at 81.50.
In the week ahead any continuation of this may see further declines for the Yen and US Dollar.The Euro remained unchanged against the dollar despite improved risk appetite and marginally improved sentiment for Greece, who managed to secure their Euro 5 Billion 10 year Bond auction successfully.However, it may be that this week that the Euro is able to make more headway against the dollar particularly if the equity markets continue to improve.
Sterling which began the week in free fall on the back of weekend opinion polls and rumors regarding the Prudential , AIA takeover recovered to close the week much as it had started. The sell off , however, does indicate how fragile the currency is. In the build up to the election it offers the prospect of some serious volatility and generally sentiment remains poor despite some better economic data.

I stick with the view of seeing 1.40 Euro/US Dollar before 1.30. The week ahead offers very little in the way of exiting economic data so currency markets may well take their lead from equity markets.

Finally,I have to include a comment of the week which comes from Greece.

The Greek prime minister said he will fight to ensure speculators don’t undermine his push to restore order to the country’s economy. It’s unjust and undemocratic that his efforts are being undermined “by some ‘kids’ in New York and elsewhere sitting in front of a computer,” he said yesterday.

Well George they were the same boys who helped you fudge the budget numbers to get in the Euro in the first place.