The Japanese yen continued to grow against the other major currencies for a third day today even after the worse than expected GDP data was released in Japan, as the risk-aversion still remains popular in the markets. The euro weakened to the late November levels against the yen as the global stock markets demonstrated a drop. The markets are still under a strong influence of the Dubai’s debt problems and the new fiscal problems in Greece. Despite the optimistic statistics coming from the United States, other economies aren’t recovering as fast as expected.
Japanese GDP annual growth in the third quarter of 2009 was reported at 1.3 percent, down from 4.8 percent shown in the preliminary report and below the revised forecast of 2.8 percent. That’s a considerable decline in the recovery pace. During the economic downturns, investors and traders tend to buy the low-risk safe haven assets and sell the high-yielding one, switching from other currencies to the Japanese yen.
USD/JPY declined from 88.34 to 87.60 today; it closed at 90.52 last Friday. EUR/JPY went down from 129.91 to 129.36, reaching the lowest level since November 27 (128.77) earlier today. GBP/JPY fell from 143.71 to 142.80.

Pound down on weaker than EU outlook

The pound started the week down versus the euro and the U.S. dollar as sentiment towards other wealthy nations in the world remain more positive than the U.K.’s economic perspectives, forcing investors to abandon pound priced assets to inject capital in more attractive currencies backed by fast recovering nations.
After a Moody’s report featuring world’s wealthiest nations in which the U.K. was rated as "resilient" against better rating of its European neighbors, France and Germany, considered "resistant", the pound tumbled further versus the euro, and also went down versus the greenback as the interest rate outlook in the U.S. changed, with speculations suggesting hikes for the mid-term future, forming a winning pattern on the dollar charts versus most of the 16 main traded currencies. Despite the U.K.’s evidences of economic recovery, the process has been slower than the resilience perceived overseas, in emergent countries and commodity exporter nations like Canada or Australia, whose currencies have been gaining consistently versus the pound in 2009.
The outlook for the pound remains negative as investors opt for higher-yielding options in risk fueled sessions, and prefer to take safer bets in moments of strong risk aversion, leaving almost no appeal for pound-priced assets, which are likely to remain less attractive than average at least until the end of the year.
GBP/USD traded at 1.6335 as of 10:15 GMT from a previous rate of 1.6470 in the intraday. EUR/GBP traded at 0.9092 from a previous rate of 0.9042.

Dollar to Fall in 2010 on Record Low Interest Rates

The U.S. dollar touched its lowest level in more than a year versus most of its main rival currencies as speculations suggest that the Federal Reserve will maintain borrowing costs in a historic record low, as the economy still urges for stimulus to provide a more solid recovery.
Several reasons are impacting further the greenback’s outlook among traders in currency market, as risk appetite remains strong, favoring high-yielding currencies in commodity-linked and emergent countries, as well as the dollar has been losing its status as the world main reserve currency, with interest rates at an all time historic low, forcing most of the investors to avoid assets in the North American nation, and shift the nature of their portfolio towards risk and more interesting opportunities overseas, setting the dollar to a new record low in 2009 this week, extending a losing streak that stared in the very beginning of the present month.
The dollar forecast for 2010 tends to be rather negative, according to analysts, as the Federal Reserve has still not indicated that interest rates will be hiked anytime soon, fact which could add confidence and attract investors back to assets in the United States. To some extent, the U.S. government is being rather tolerant with its weakened currency, since they need to make their products more competitive to export markets, and consequently recover the economy in a faster pace.
EUR/USD traded at 1.5033 as of 15:15 GMT from a previous rate of 1.4973 yesterday. AUD/USD traded at 0.9317 from 0.9283.

Canadian Dollar Hits Record High on Global Growth

The Canadian currency traded at the highest level in almost a month after China posted a report indicating a sharpened growth, consequently favoring the loonie’s outlook due to Canada’s exporting economic profile, which is likely to be more favored than the U.S. in the short term of an economic recovery in global scale.
The loonie is extremely influenced by the sentiment in equities markets and demand for commodities, specially the crude oil, which rose today favoring the Canadian currency that touched the highest level since the Bank of Canada started to stress that a strong currency could cause a slowdown in the North American nation recovery two months ago, forcing artificially a severe losing streak for the Canadian dollar which traded near parity versus its U.S. counterpart before the BOC’s psychological interventions. The fact that China is posting positive figures for its economy also helped the loonie directly and indirectly, since the economic behavior of the Asian nation is highly considered among traders and has a strong power to drift markets sentiment.
Despite the Bank of Canada’s position against a strong loonie, risk appetite has been so intense, and decreased attractiveness for the greenback so deep, that traders are buying assets in Canada once again and betting on a strong loonie for the mid-term, as the world economy recovers increasing demand for Canadian commodities.
USD/CAD traded at 1.0458 as of 14:45 GMT from a previous rate of 1.0525 in the intraday. CAD/JPY traded at 85.89 from 84.77.

Brazilian Real Gains Sharply on Risk Demand

The Brazilian real had one of the best weeks in more than 2 months as demand for commodities and emergent markets assets rose globally, maintaining the real as the best performing currency in 2009 among the 16 main traded ones in foreign-exchange markets.
The real extended its gains this week flirting with the $1.70 level as risk appetite was strong during most of the previous 5 days, even if rising speculations that the national central bank will impose further measures to control the currency’s rally, following the implementation of a new tax for foreign capital invested in Brazilian stocks created last month.
USD/BRL closed the week 1.7193 from 1.7650 in the beginning of the week.

South African Rand Top Weekly Currency on Gold Rise

The South African rand was the best performing among 16 main traded currencies in foreign-exchange markets, as demand for metallic commodities exported from the African nation rose globally, increasing their rates and influencing positive the rand’s price and attractiveness.
This week gold and platinum, the biggest South African metal exports rose significantly as risk appetite reigned during most of the past five days, providing support for the rand to top the rank of best performers currencies, and causing the sharpest weekly rally in 3 months. Another positive point favoring the rand this week was a decline in foreign currency reserves growth, which could be interpreted as a neutral position from central bank policy makers regarding the current high levels of the rand. The South African rand is ranking among the top 5 best performing currencies in 2009, with other currencies from countries with similar profile as the South African nation, with high interest rates and a commodity export driven economy, such as the Australian dollar, and the Brazilian real.
Analysts affirm that the South African Reserve Bank position towards the rand’s strength is favorable for the currency to rally, as in other countries, like Canada, a strong currency is being highly unwelcome, which is affecting the Canadian dollar profile, differently from the rand, which still has a favorable scenario to grow further.
USD/ZAR closed the week at 7.54 after being traded to as high as 7.91 during the week.

The South African rand was the best performing among 16 main traded currencies in foreign-exchange markets, as demand for metallic commodities exported from the African nation rose globally, increasing their rates and influencing positive the rand’s price and attractiveness.
This week gold and platinum, the biggest South African metal exports rose significantly as risk appetite reigned during most of the past five days, providing support for the rand to top the rank of best performers currencies, and causing the sharpest weekly rally in 3 months. Another positive point favoring the rand this week was a decline in foreign currency reserves growth, which could be interpreted as a neutral position from central bank policy makers regarding the current high levels of the rand. The South African rand is ranking among the top 5 best performing currencies in 2009, with other currencies from countries with similar profile as the South African nation, with high interest rates and a commodity export driven economy, such as the Australian dollar, and the Brazilian real.
Analysts affirm that the South African Reserve Bank position towards the rand’s strength is favorable for the currency to rally, as in other countries, like Canada, a strong currency is being highly unwelcome, which is affecting the Canadian dollar profile, differently from the rand, which still has a favorable scenario to grow further.
USD/ZAR closed the week at 7.54 after being traded to as high as 7.91 during the week.