Rise in Risk Appetite
The US dollar continued its losses against the euro on Monday. The euro gained a high of $1.4821 and traded at $1.4812 in later trading. Positive data from the US housing and construction sector triggered a rise in risk appetite among investors and put downward pressure on the dollar and the Japanese yen. US stocks rose along with gold and oil prices lifting risk sentiment and benefited commodity based currencies such as the Australian and New Zealand dollars. Nick Bennenbroek of Wells Fargo stated, “I think we’re clearly seeing some appetite for risk today. The gains in U.S. equities in particular are seeing the dollar give up some ground.”
Dollar Seen as Barometer of Risk Appetite
During the current recession the US dollar has been seen as a barometer of risk sentiment among traders and investors. The dollar rises on bad economic news as investors seek the safe haven of the dollar and the dollar falls when the news is good and investors seek riskier assets. The dollar vs. yen rate rose 0.4% to 90.50 yen and the euro gained 1.1% against the yen trading at 134.12 yen.
Economic Expansion
Good news from the US sent risk appetite higher. Manufacturing activity in the US rose to its highest in three and one half years and pending home sales also rose in September. Thomas Nyheim of Christiana Bank & Trust Co. said, “All the numbers show stabilization and the start of some expansion. That’s a continuation of what we’ve been seeing for the past couple of months.”
Busy Week Ahead
Currency markets will be presented with a slew of economic data this week. Investors remain cautious in advance of monetary policy meetings in the US, the Euro Zone, Australia and the United Kingdom. In addition the US jobs report is due on Friday and the G 20 group of nations meets next weekend. In a note to investors UBS strategists wrote, “How this week evolves could have major implications for FX markets and the global economy, as investors and policy makers alike seek to establish their strategies for next year.”
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.
Dollar at One Year Low
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.
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.
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.
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.
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.
G7 Meets in Rome
On Friday the US dollar gained against the Yen and fell against other major currencies including the troubled Euro. All eyes were on the G7 conference taking place this weekend in Rome. The G7 meeting is expected to influence currency markets and affect forex investment opportunities. A G7 statement released late Friday mentioned no specific currencies except China’
s Yuan. China has committed to more flexible exchange rates which could lead to a stronger Yuan and increased forex opportunities provided by the currency.
Japan to Move Against Excessive Currency Moves
Many forex brokers thought that the statement would specifically mention the Japanese Yen but no statement was forthcoming. Japanese Finance Minister Shoichi Nakagawa stated that the Japanese government will move against excessive currency moves. British Chancellor of the Exchequer Alistair Darling said that any discussion of currencies would be “in general terms.”
Stocks to Influence Forex Opportunities
Many forex brokers believe that there would be no mention of the Pound and the Yen and expect Forex markets to follow the lead of equities markets which will enable them to predict forex investment opportunities. Shaun Osborne of TD Securities stated, “We are still hinging on risk appetite and we are keying off equities. That story on mortgage subsidy gave equities a lift including the dollar versus the yen and there’s still some carry-over from that.”
Markets React to US Stimulus Plans
The US dollar and the Japanese Yen traditionally signal either risk aversion or risk appetite. The rising number of mortgage defaults in the US has caused a credit crisis with many banks unwilling to lend which has crippled the global economy. Markets were pleased with the news that the Obama administration has proposed a plan to help prop up the troubled US housing market.
Investors Remain Cautious
There were signs of optimism Friday but many investors remained cautious waiting for news from the G7 conference. Even a slight short lived return to risk appetite provides investors with increased Forex opportunities. Trading is expected to be light on Monday as US markets close for President’s Day. The G7 conference ends Sunday and Forex brokers will be waiting for the final statements from the meeting. Hopefully we will see news that indicates a turnaround in the global economy.
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.
