Dollar Rallies Last Week
The US dollar ended last week with a rally that provided forex opportunity for many investors. There were several reasons cited for the dollar’s strong performance. Many traders and investors are wondering if the dollar will provide the same forex opportunities as it did last week.
Remarks by German Finance Minister Put Pressure on Euro
Several factors contributed to the dollars rally. Remarks by the German Finance Minister about fiscal responsibility put pressure on the Euro. Investors were relieved to hear that replacing the US dollar as a reserve currency would not be a topic at the upcoming G 20 summit. The Japanese fiscal year ends March 31st and Japanese traders are purchasing Yen and selling other major currencies.
ECB Meets This Week
This week brings three key events that could affect markets and the forex opportunity they provide. The European Central Bank is expected to announce rate decisions which are bound to affect the Euro. Besides rate cuts investors will be watching to see what other actions the ECB plans to take addressing the recession in the Euro Zone. If the ECB indicates it is willing to adopt Quantitative Easing the sale of Euros could benefit the dollar and provide many with forex investment opportunities.
G 20 Summit This Week
The G 20 summit begins Thursday and is bound to have a profound effect on markets and forex opportunities. Although no significant decisions are expected China is seen as a wild card at the conference.
US Non Farm Payrolls Due This Week
US non Farm Payrolls are expected Friday and will show that an additional 656,000 Americans lost jobs in March. Traditionally this report determines risk appetite or aversion to some extent. If investors become skittish the increase in risk aversion is sure to benefit the dollar.
US Dollar Selloff
This week has been an active one for forex markets and has offered investors many new forex investment opportunities. Rising risk sentiment has prompted a sell off of the US dollar as forex brokers seek forex opportunities offered by several higher performing currencies.
Euro Up 6% Since Last Week
The Euro rose to $1.3646, the highest since January and up 6% from last week when the Euro traded at $1.2922. Earlier gains declined after a senior German legislator stated that Euro Zone countries had agreed on a rescue plan to keep some member states from going bankrupt. Forex brokers took note of a statement by a European Central Bank official that denied the existence of the fund.
Fed Policy Concerns
Forex brokers expressed concern about the move by the Federal Reserve to purchase $300 billion of long term government debt. The move was seen by many forex brokers as inflationary and feared this could undermine the greenback. The US dollar has fallen by 5% this week due to actions by the fed and rising risk appetite.
Latin American Currencies Offer Opportunity
This week forex opportunities were provided by a variety of currencies. Latin American currencies provided many with forex investment opportunities. The Brazilian Real, the Mexican Peso, and the Columbian Peso all rose against the dollar providing forex opportunity to forex brokers and investors.
New Zealand Dollar Gains 7%
Many took advantage of forex opportunities offered by the New Zealand dollar which rose 7%, the biggest rise since the biggest rise since the Kiwi dollar was floated in 1985. The US dollar rose slightly on Friday but many forex brokers expect the dollar to suffer its largest weekly decline in 24 years. In recent weeks the dollar has provided investors with safe haven and forex opportunity as investors and forex brokers turned to the dollar for safe haven in times of economic uncertainty.
Forex markets have provided many with forex investment opportunities this week. Many believe that stimulus packages are beginning to have a stabilizing effect on the financial sector. Despite the ongoing recession forex brokers and investors are still able to turn a profit.
Dollar Falls Against Euro
On Tuesday the US dollar fell against the Euro but rose against the Japanese Yen as risk appetite returned to forex and stock markets. The rise of the Euro provided many investors with Forex investment opportunity. A surprise Euro se 22% rise in US housing starts and a rise in German investor confidence boosted investor confidence. The Euro gained against the Yen as investors were afraid that recent moves by the Bank of Japan could flood markets with Yen.
Fed Expected to Buy Treasuries
Many forex brokers believe that if the US Federal Reserve announces plans to buy long-dated Treasuries to keep long term rates low forex investment opportunities will increase. Some traders are holding back, waiting for the Fed’
decision. Mark Frey of Custom House in Victoria, B.C. stated, “The Fed decision is restraining the market. Nobody is stepping into any big positions ahead of it.”
47% Reduction of Japanese Exports
The Yen which has traditionally provided investors with safe haven and forex opportunity is troubled by recent actions by the Bank of Japan and political instability. Japan also experienced an astounding 47% reduction in exports in the last quarter of 2008 and exports are at their lowest point in years. The BOJ announced a loan program for banks hurt by falling stock prices and may increase its purchase of government bonds.
Latin American Currencies Provide Forex Opportunity
Although many investors do not expect the Euro to continue its rally at present it is providing forex investment opportunities for traders. Gains by the Brazilian Real, the Mexican Peso, and the Columbian Peso provided investors with many forex investment opportunities. Online forex brokers have reported a lot of activity in the past few days as investors snap up the forex opportunities offered by Latin American currencies.
Financial Markets Stabilizing
Many forex brokers see signs that financial markets are beginning to stabilize and believe this has increased risk sentiment. Along with this many forex brokers believe that the Fed’
s decision could give new impetus to Forex markets. Hopefully the trend towards risk appetite will continue.
Risk appetite has returned as equity markets rallied for the fifth straight day. As usual, the return to risk appetite brought new forex investment opportunities for forex brokers. The Euro rose to $1.30, its highest in a month. The troubled British Pound also rose on Monday’s trading.
The rise of the Euro provided many forex brokers with forex opportunities that the currency has been unable to provide through most of the global recession. A group of G 20 finance ministers pledged to double the resources available to emerging markets which also raised investor sentiment. Currency markets are taking their cue from equity markets, raising risk sentiment, resulting in many forex investment opportunities. Dan Cook of IGM Markets stated, “The equity market gains are really feeding risk appetite. But while we’ve had a good run for a few days, there’s still not much good news, so we’re vulnerable to a reversal.”
Throughout the recession risk aversion has been dominant and safe haven buying has limited forex opportunity is the past. Despite the continuous stream of bad economic news some forex brokers remain upbeat and some believe that the recession is beginning to turn around. Fed Chairman Ben Bernanke said he expects the recession to continue for the rest of 2009. He also said that stabilization of the banking sector is essential before recovery can take place.
The Japanese Yen which has provided forex opportunity in the past is under pressure and Japanese economic data keeps getting worse. The Bank of Japan meets this week and is considering the purchase of long-dated government bonds. Forex brokers will be watching the Bank’s actions closely.
The last two weeks has seen a rise in investor risk sentiment and new forex opportunities. Many forex brokers advise caution and Dan Cook of IGM Markets states the obvious, “But while we’ve had a good run for a few days, there’s still not much good news, so we’re vulnerable to a reversal.”
European and US Share Prices Rise
The dollar’s rally ended on Wednesday as investors took advantage of forex opportunities provided by the news that both European and US share prices rose broadly. The return to risk appetite is providing many new forex investment opportunities globally. The news that banking giant Citigroup was profitable in January and February sent share prices up and signaled a return of risk appetite which traditionally means more forex opportunity for investors.
Emerging Currencies Doing Well
Emerging currencies provided new forex opportunities for investors. Some economists expect emerging economies to outperform both European and US economies in 2009. The Hungarian Florint and the Polish Zloty rose on currency exchanges and provided forex opportunity to savvy investors. The Florint rose 1.1% against the dollar while the Zloty rose 0.60%.
Euro Rises Against Dollar
Even the troubled Euro rose to a two week high against the dollar and forex brokers were quick to take advantage of the rise. Omer Esiner of Ruesch International stated, “We’re seeing a general rebound in risk appetite given improving stock performance.” The Citigroup memo assuaged fears about the health of the banking sector, undermining the dollar’s safe-haven appeal.´
Many Expect Rally to be Short Lived
Although some forex brokers expected the bounce to be short lived. Aside from the CitiGroup news economic data from Europe, the US, and Japan continues to show a deepening recession. Some forex brokers pointed out that the US government is preparing a fourth contingency plan for CitiGroup. Adam Fazio of CIBC World Markets stated, “The government wouldn’t be putting a fourth plan in place if it didn’t think there was some chance that it would be needed.”
Pound Up Against the Dollar
Even the beleaguered Pound managed to rise 0.7% against the Dollar to $1.3864. The rise is expected to be short lived since Lloyds Banking Group announced that the British government will own 77% of the bank raising fears about the banking sector. The return of risk appetite is providing increased forex investment opportunities. How long this will last is anybody’s guess.
