The US dollar pulled back from a 14 month low on Friday after remarks by Federal Reserve Chairman Ben Bernanke who said that the Fed will tighten monetary policies when recovery is apparent. The Canadian dollar rose as data showed that Canada added sic times as many jobs than expected in September and a huge fall in unemployment throughout Canada. The greenback also pulled back from a two week low against the euro and also gained on the Japanese yen.

Low Rates and Quantitative Easing Dollar Negative

Bernanke also said that the Fed must continue to stimulate the economy but also said that the Fed cannot do so indefinitely due to inflation fears. Low interest rates and quantitative easing have put downward pressure on the dollar during the current recession. Vassili Serebriakov of Wells Fargo stated, “The mere fact that Bernanke mentioned tightening in his speech, especially given the fact it’s towards the end of the week, provided some excuses to take profits on short dollar positions. The market has been running with the idea that the Fed is going to be on hold for a very long period of time, probably longer than a lot of other major central banks.”

DXY Gains

On Friday the ICE Futures U.S. dollar index (DXY) rose 0.4% to 76.251 after hitting a 14 month low of 75.767 on Thursday. Some currency experts said that Bernanke was only stating the obvious and believe the Fed’s next move will be a rate increase in the third quarter. The Canadian dollar hit a one year high after Canadian data showed job gains of 30,600 in September. Earlier predictions had pegged job gains at 5,000 and the news was a pleasant surprise for Canadians. The US dollar fell 0.5% vs. the Canadian dollar and traded at C$1.0464 after falling as low as C$1.0426.

Dollar Gains on Yen

The dollar vs. euro gained 0.3% and the euro traded at $1.4750. The dollar also gained against the Japanese yen posting a 1.2% gain at 89.47 JPY.

Quick Forex Tip: Electronic currency trading offers many advantages to the average investor. Anyone can learn how to trade currencies by using one of the many excellent training programs available online for free. In addition many retail forex brokers provide potential investors with training programs and demo accounts. Electronic currency trading offers recession proof trading because in the currency market when one currency falls another rises giving the savvy trader the opportunity to profit from the move.

On Wednesday (Sept. 23rd) the dollar hit a new low against the euro and declined against the Japanese yen after the US Federal Reserve said in a statement that the US economy is recovering and that the Fed will continue, but slow, the purchase of mortgage backed securities. As expected, the Fed will keep rates at near zero for an extended period of time. Dan Cook of IG Markets in Chicago stated, “This continues the theory of ‘green shoots. We didn’t get anything from them today that will change direction.” Cook also stated that the Fed’s decision to prolong the Mortgage Backed securities program was widely expected. Cook said, “They don’t want to shock the market just by stopping them.”

Risk Appetite Spurs Dollar Selling

The euro was up 0.2% and traded at $1.4842 after reaching a high of $1.4842, the highest since September 2008. The dollar vs. yen rate fell 0.1% to 91.04. The dollar index, or DXY, which tracks the dollar against six other major currencies, fell 0.2% to 75.981.Currency traders are selling the dollar in favor of higher yielding assets and currencies. After the Fed statement many forex traders expect dollar selling to continue. Michael Woolfolk of BNY Mellon stated, “We see just some fine-tuning of the economic outlook. And now that the risk of the Fed meeting has passed, people are comfortable returning to the trend of selling the dollar. That’s the bottom line.”

Global Stocks Up

World stocks hit their highest in nearly a year and both European and Asian shares were up prompting a rise in risk appetite among investors. On Tuesday U.S. Treasury Secretary said that the US economy was at the “beginnings” of recovery and that the key to recovery is to ensure that any recovery is self sustaining. Some investors remain cautious in advance of the G 20 meeting later this week in Pittsburgh. Most currency traders do not expect the G 20 summit to disrupt current positive trends. Ian Stannard of BNP Paribas said, “Overall the FOMC and the G20 are unlikely to disrupt the recent positive tone in asset markets and that’s likely to see the trends in currency markets resume.”

Quick Forex Tip: There are many factors that affect currency exchange rates and those who want to trade forex markets should be familiar with them. Economic factors are probably the most important in determining the value of a currency. Political conditions can also affect exchange rates. Those who want to trade forex markets would be well advised to keep abreast of current political and economic events. Thanks to the internet, those with the right knowledge and an internet connection can join this exciting market and take advantage of the lucrative opportunities it can provide for investors.

Last week’s big winners, the Aussie and Kiwi dollars fell for the third straight day against the US dollar as declining stocks, commodities and gold spurred safe haven demand. The Federal Open Market Committee (FOMC) meets Tuesday and Wednesday to decide monetary policies putting downward pressure on both currencies in advance of the meeting. David Tien of Fischer Francis Trees & Watts stated, “What’s happening right now is consolidation in front of the FOMC, not that there is any view, whisper or chatter that they are going to change anything. I attribute it to sensible risk management. If you caught the move, why risk taking it into FOMC?”

Profit Taking In Advance of FOMC

The Aussie dollar fell 0.6% to 86.24 cents, down from a high of 86.75 cents last week. The Kiwi dollar fell 0.4% to 70.66 cents after hitting a high of 70.93 cents. About the Aussie dollar Besa Deda of St. George Bank Ltd. Stated, “The Aussie will take much of its direction from offshore developments, particularly the way investors feel about the global economic story. We might see a bit of profit taking ahead of the FOMC.”

Fed May Discuss Quantitative Easing Exit Strategy

Many experts expect the Fed to discuss exit strategies from quantitative easing. Phil McHugh of CurrenciesDirect stated, “The recent dollar strength coming back into play has been attributed to this weeks FOMC interest rate meeting in the US. The expectation is growing that the Fed will discuss exit strategies (from its massive economic stimulus programs) in the near future and this will signal a hawkish tone with the potential for interest rate rises to follow,”

G 20 Prompts Investor Caution

In addition to the FOMC meeting forex markets will be paying close attention to the G 20 summit taking place in Pittsburgh on Thursday and Friday. In the past forex trading has been volatile in advance of G 8 and G 20 meetings. US President Barack Obama has said he will push G 20 leaders for a reshaping of the global economy. It looks like a busy week for forex markets.

Quick Forex Tip: Political conditions play a major role in global currency trading. Political instability can cause a currency to lose value. Recently political problems and deficit concerns in Greece caused the euro to fall in global currency trading centers. Market psychology although difficult to define can also affect market perceptions and can either help or pressure currencies.

The already beleaguered US dollar fell to a one year low against a basket of currencies on Wednesday (Sept. 16th). Higher global share prices pared safe haven demand as investors sought higher yielding assets. The Japanese Yen reached a seven month high against the greenback after Japan’s incoming finance minister said that a strong yen had advantages for the Japanese economy. The euro to dollar rate hit a nine month high of $1.4715. The last time the euro hit $1.47 was in September 2008.

Link Between Wall Street and Risk Appetite

Massive US deficits also caused investor concern but higher stocks were the main driver of risk appetite. Ronald Simpson of Action Economics stated, “There’s still this persistent link between Wall Street and risk. With stocks going up, it continues to be very difficult for the dollar to rally.” Earlier in the year many analysts thought that the link between stock markets and risk appetite were weakening but that assessment proved to be premature. Traditionally the dollar trades lower when stocks perform well.

Japanese Finance Minister Will Not Intervene

The Japanese yen to dollar rate fell 0.9% against the yen to a seven month low of 90.13. The yen made gains after the incoming Japanese finance minister said he was opposed to intervention as long as market moves remained moderate. An unnamed trader in London stated, “It’s significant that Japanese officials don’t see the need to intervene at the moment … they’re not particularly worried about a strong yen. So the market is taking dollar/yen lower to see what’s around the 90.00 yen area.”

Pound May Hit $1,70 in the Near Future

Some currency experts are predicting the Pound to dollar rate will hit $1.70 in the near future. Karen Jones, a London based analyst, said, “Pound-dollar has sold off to its 50 percent retracement of the recent leg higher. “Given the recent weakness of the U.S. dollar, the risk has increased for the upmove to then reassert” towards $1.7040- $1.7050 in the next three months.

Quick Forex Tip: Euro currency trading requires a lot of research and investors must keep track of economic information from the twelve member nations. The economy of just one nation can affect the euro’s exchange rate.  In 2010 political uncertainty and deficit concerns about Greece caused the euro to fall considerably in global forex markets. Euro currency trading can be exciting and very lucrative for investors who have done their homework.

Forex trading has become wildly popular worldwide and the Islamic world is no exception. It has been estimated that the amount of money invested in Shariah compliant investments totals over $2.7 trillion dollars. Shariah compliant simply means that the investments comply will religious law of Shariah law. Many investment funds that are Shariah compliant usually have Muslim clerics as paid consultants. Several investment houses use compensated Muslim clerics including such investment giants as Standard and Poors, Dow Jones, Deutsche Bank, Goldman Sachs and many others.

Shariah Compliant Financial Institutions

As can be seen the Shariah compliance finance market is huge and enables those of the Islamic faith to invest in a religiously and socially acceptable manner. Muslims living in non Muslim countries are allowed to use regular banks and financial institutions when there are no Shariah compliant alternatives available in that locale. Once a Shariah compliant financial institutions and banks are available the devout Muslim is obligated to use them.

Shariah Law and Forex Trading

There are several forex brokers and traders that specialize in investing according to Shariah law. Shariah compliant forex trading forbids the receiving and paying of interest or swaps while buying and selling on forex exchanges. According to The Accounting & Auditing Organization For Islamic Institutions; “SWAPS are not permitted in the forms in which they are practiced in commodity exchange”

Shariah Compliant Market Set For Huge Growth

Since Islamic Shariah law forbids the paying and receiving of interest Muslim forex traders will use Shariah compliant swap free trading platforms for their forex trading. It should be noted that these same trading platforms are open to anyone regardless of religious affiliation. These Shariah compliant accounts are not necessarily free from fees and commissions.
Because of the immense wealth in the Middle East and other Muslim countries Shariah law compliant forex brokers and traders have become big business in the world of forex. Shariah compliant brokers can easily be found online. As was stated before at present Shariah-compliant investments total over $2.7 trillion and this number is expected to grow by several times the present amount within a few short years if present trends continue.

Quick Forex Tip: The forex market offers investors the opportunity to profit even during a recession. If one currency rises another must fall creating constant opportunities for savvy investors to profit from currency moves. It is not difficult to learn how to trade forex currency and there are many very well written and user friendly learning programs and training courses available for free on the internet.  Besides training, the most important thing those who trade forex currencies must learn to follow political and economic news and interpret the results and the affect current events will have on forex markets.

Andrew Wilkinson of Interactive Brokers Group is predicting that the euro could fall as low as $1.33 by the end of summer. Arguments in favor of the euro include the fact that the Euro Zone has been more temperate in addressing the recession than the US and the UK both of whom have injected billions into their economies in attempts to address the financial crunch and credit crisis. Many economists have been concerned that the injection of such massive sums would bring about inflation but last Friday’s US employment indicate that the economy is recovering and inflation is not a threat.

Downward Pressure on the Euro

Many Federal Reserve figures have argued that the slow rate of recovery block inflationary threats. As if validating the Fed’s position U.S. interest rate futures fell last week. The Euro Zone is widely seen as behind the curve in addressing the recession and many believe that this lack of action will put downward pressure on the euro.

Other factors affecting currency exchange rates include Tuesday’s auction of $37 billion in 3-year Treasury bonds. The auction was well received and investors snapped up the short term T bills. If past results are any indicator the auction of 7 and 10 years bonds will in all likelihood attract investors.

Weak Stocks Boost Yen

Weakening stock markets have put downward pressure on the euro which has fallen against the Japanese yen as safe haven demand increases. Many analysts see economic performance in the Euro Zone as weak. In an article published by Finnish newspaper Uutispaeivae, European Central Bank member Erkki Liikanen said that the economic recovery of the 16 nation Euro Zone would take some time. The US dollar is expected to hold recent gains and Richard Grace of Commonwealth Bank of Australia stated, “The case is building for an eventual turn higher of the dollar. The U.S. economy is improving and the economy will likely emerge from the global recession ahead of Europe.”

Quick Forex Tip: Electronic currency trading offers many advantages to the average investor. Anyone can learn how to trade currencies by using one of the many excellent training programs available online for free. In addition many retail forex brokers provide potential investors with training programs and demo accounts. Electronic currency trading offers recession proof trading because in the currency market when one currency falls another rises giving the savvy trader the opportunity to profit from the move.

Last week’s good news from the US raised investor confidence and provided many with new forex opportunities. In the US the unemployment rate fell for the first time in fifteen months and fewer jobs were lost than expected. Emerging markets are starting to benefit from the recovery. Nick Chamie of RBC Capital stated, “Emerging markets are hopefully going to benefit from a global recovery that gains a bit more traction in the second half of this year.”

Recovery Dollar Positive

Stocks rallied across the globe and the US dollar reached a seven week high against other major currencies. The British pound was pressured downward by the news that the Bank of England intends to engage in more quantitative easing. The Japanese yen fell against most major currencies as Japanese investors sought higher yielding assets overseas. US Treasuries posted their weekly increase since 2003 making them more attractive in this week’s upcoming auction. Ulrich Leuchtmann of Commerzbank AG stated, “The recovery is setting in relatively quickly. It’s positive for the dollar in the long term because when the economy recovers it’ll be clear that the U.S. is coming out of the crisis better.”

Dollar Returning to Fundamentals

Many investors are returning to the view that good economic news should benefit the dollar rather than pressure it downward as it has in the recent past. The dollar index rose 0.8% last week to 78.975 reducing safe haven demand for the greenback. Many forex experts see the dollar returning to fundamentals. Stephen Gallo of Schneider Foreign Exchange remarked, “This is monumental, This would mark a sea change in how speculators trade economic data and the overall view of the U.S.”

Full Calendar This Week

The coming week promises a full economic calendar. On Tuesday the Federal Reserve begins a two day meeting, on Wednesday June’s international trade data is scheduled for release, and Friday will see the release of July consumer prices, industrial production and consumer sentiment.

Quick Forex Tip: There are many factors that affect currency exchange rates and those who want to trade forex markets should be familiar with them. Economic factors are probably the most important in determining the value of a currency. Political conditions can also affect exchange rates. Those who want to trade forex markets would be well advised to keep abreast of current political and economic events. Thanks to the internet, those with the right knowledge and an internet connection can join this exciting market and take advantage of the lucrative opportunities it can provide for investors.

Commodity Based Currencies Big Winners

Better than expected data from investment banking giant Goldman Sachs and positive US retail sales data have prompted a slight rise in risk sentiment among forex traders and investors. Currency exchange rates have been affected with commodity based currencies like the Aussie, Canadian, and New Zealand dollars have been the big winners. After six straight weeks of declines the Canadian dollar rose 1.3% to C$1.1353 against the US dollar. The yen fluctuated against the US dollar and euro as investors bet that the Goldman Sachs data indicated that the financial industry is recovering.

Volatile Trading Expected

Investors by and large still remain somewhat cautious and some analysts expect volatile trading throughout this week. Meg Browne of Brown Brothers Harriman & Co. stated, “The market’s hesitant because we’ve got more results out there and Goldman was one of the stronger companies. Things are better. It doesn’t mean we’re out of the woods, but things are in a better state.” Goldman Sachs, JPMorgan Chase & Co. and IBM are some of the 30 odd companies in the Standard & Poor’s 500 Index due to release second quarter results this week.

New Zealand Economy Improving

The pound rose 0.3% to $1.6274 after the Royal Institution of Chartered Surveyors said home priced rose for the first time in twenty months. The New Zealand dollar rose 0.8% against the yen to 59.23 after a statement by New Zealand’s Reserve Bank Governor who said that the New Zealand economy is likely to recover quicker than the economies of New Zealand’s trading partners.

Geithner Committed to Strong Dollar and Deficit Reduction

Addressing investor concerns about huge US deficits Treasury Secretary Timothy Geithner said in Jeddah, Saudi Arabia, that the US government is committed to a strong dollar and that he is “very committed” to cutting the US deficit. Despite the economic optimism some experts counsel caution and see current data as not sufficient to support current optimism. They also predict volatile currency trading this week

Quick Forex Tip: Political conditions play a major role in global currency trading. Political instability can cause a currency to lose value. Recently political problems and deficit concerns in Greece caused the euro to fall in global currency trading centers. Market psychology although difficult to define can also affect market perceptions and can either help or pressure currencies.

]]> http://www.forexopportunity.net/2009/07/s-ps-500-index-q2-reports-due-this-week/feed/ http://www.forexopportunity.net/2009/07/dollar-not-likely-to-be-challenged-at-g-8-meeting/ http://www.forexopportunity.net/2009/07/dollar-not-likely-to-be-challenged-at-g-8-meeting/#comments Thu, 09 Jul 2009 17:50:35 +0000 admin http://www.forexopportunity.net/?p=749 Dollar’s Reserve Status Safe For Now

The G 8 summit this week is the focus of Forex traders and investors and those who follow currency movements. There has been speculation that China or Russia would force a discussion of the US dollar’s reserve currency status but according to a statement by an unnamed source the reserve status of the US dollar will probably not be mentioned in the final communiqué issued by the group. According to the anonymous source, “It is expected to be mentioned and discussed remotely.  But the discussions have not yet reached the level of putting it in writing in the communiqués.”

China Says Dollar is Still Important Reserve Currency

The G 8 summit will also include Brazil, India, China, Mexico and South Africa and Egypt. This summit dubbed the ‘G 14’ will meet on July 9th to discuss climate issues, trade and financial issues. China has asked for a discussion of proposals for a new global reserve currency or currencies. In a reassuring statement Chinese Vice Foreign Minister He Yafei told the press, “The U.S. dollar is still the most important and major reserve currency of the day, and we believe that that situation will continue for many years to come. You may have heard comments, opinions from academic circles about the idea of establishing a super sovereign currency. This is all, I believe, now a discussion among academics. It is not the position of the Chinese government.”

Canada Says Dollar a Stabilizing Force

Canadian Finance Minister Jim Flaherty joined in the discussion saying that the US dollar has been a stabilizing force during the current global recession. Flaherty said he expects a general discussion of foreign exchange rates during the G8 summit but is unsure if the results of that discussion would be in the final communiqué. This weeks meeting will start with the G 8 nations meeting alone and later meetings will include representatives of emerging nations.

Quick Forex Tip: Euro currency trading requires a lot of research and investors must keep track of economic information from the twelve member nations. The economy of just one nation can affect the euro’s exchange rate.  In 2010 political uncertainty and deficit concerns about Greece caused the euro to fall considerably in global forex markets. Euro currency trading can be exciting and very lucrative for investors who have done their homework.

A smaller than expected rise in US inflation boosted hopes that recovery is underway and put downward pressure on the US dollar. Rising risk appetite has pressured the dollar for the past few weeks as investors sell the dollar in favor of higher yielding currencies. Brian Dolan of Forex.com stated, “We’re seeing dollar weakness because the idea is that inflation is not pretty evident right now and that is seen as a positive in terms of the growth outlook and risk appetite.”

Markets Due For Correction

Mixed economic data from the US in recent weeks has left forex traders unsure how to trade the US dollar. The euro to dollar rate fell by 0.1% to $1.3828. The Australian dollar and the euro have been rising since March as signs of recovery emerged paring safe haven demand which traditionally helps the dollar. Some analysts advise caution and believe that hopes of recovery are premature and equity and currency markets need a pause or correction so investors and traders can assess global recovery.

BRIC Summit Fails to Address Dollar

Despite remarks by Russia’s president questioning the dollar’s reserve status this week’s meeting of BRIC (Brazil, Russia, India, and China) nations the group issued no statement regarding the dollar’s reserve status. The group of nations is demanding greater say in the world’s financial system. The remarks by the Russian president pressured the dollar in Tuesday’s treading and affected currency exchange rates. Masafumi Yamamoto of Royal Bank of Scotland in Tokyo stated, “At the end there was no strong comment to play down the role of the dollar. The global financial markets are in correction mode.”

Investors Unwinding Safe Haven Positions

The euro rose 0.2% to $1.3860 after heading for a monthly low of $1.3747. The euro has gained 11% against the dollar since March and hit a yearly high of $1.4339 this month. The dollar has fallen against major currencies as investors unwind safe haven positions in favor of higher yielding assets.

Quick Forex Tip: The forex market offers investors the opportunity to profit even during a recession. If one currency rises another must fall creating constant opportunities for savvy investors to profit from currency moves. It is not difficult to learn how to trade forex currency and there are many very well written and user friendly learning programs and training courses available for free on the internet.  Besides training, the most important thing those who trade forex currencies must learn to follow political and economic news and interpret the results and the affect current events will have on forex markets.