Will the Pound Shrink with U.K.’s Economy?

The pound has been one of the biggest losers this year in foreign-exchange markets since several reasons, specially due to an artificial credit bubble that destabilized the British economy when the global slump crushed the world last year, forcing the pound down significantly, mainly versus the euro.
The Great Britain pound did not manage to perform well again this week in foreign-exchange markets due to a gross domestic report published this Friday that surprised analysts which forecast a timid, but important quarterly growth for the British economy, which was not confirmed, indicating that the United Kingdom remains in the worst recession in more than 50 years, shunning traders and investors from positions in the United Kingdom. British Isles economic outlook is more than a reason for the Bank of England to maintain its quantitative easing measures, which even if have not been enough effective, the situation could be worse if such measures would have not been taken, as a side effect for its asset-purchase program, the pound has been losing virtually every week in currency markets.
The GDP figures destroyed the improved sentiment towards the pound after Mervyn King’s comments suggesting that interest rates would be raised at some point, bringing back pessimism that the present economic situation in the United Kingdom remains complicated, forcing the pound down for another week.
GBP/USD closed this week at 1.6310 after touching 1.6693 before the GDP report.

Swedish Krona on Interest Rate Forecasts

The Swedish krona fell today after the national central bank maintained interest rates at a record low, indicating that the Nordic economic will require further stimulus to recover from the current recession.
Riksbank, the national banking institution of Sweden, not only left its benchmark interest rates unchanged but also declared that low levels will remain until next autumn, decreasing attractiveness for the krona since lower interest rates provide less profit opportunities for investors, consequently being the factor behind the krona’s fall today in currency markets.
EUR/SEK closed this Thursday at 10.23 from an opening rate of 10.31.

Bank of Canada Takes Measures to Force Loonie Down

After trading once again near parity with its U.S. counterpart, the Canadian dollar witnessed a significant fall today as the national central bank stated that a strong currency will cause problems and slow down the economic recovery in the country, shunning investors from Canada, at least, temporarily.
Bank of Canada held its overnight rates at 0.25 percent as most of economic analysts were expecting, but the tone of policy makers declarations was the main driver for a bearish day for the Canadian dollar, as, according to central bankers, a strong currency in Canada will impact directly and significantly the economic recovery in the country, forcing the loonie down versus most of 16 main traded currencies in foreign-exchange markets this Tuesday, as a number of traders are already expecting more effective measures from the Canadian central bank to halt its currency rally.
After trading at the highest level since July 2008, the loonie’s rally become an evident reason of concern for Canadian economic recovery, according to analysts. From now on, a dispute is likely to take place, as demand for Canadian commodities rise, forcing the loonie up, the national central bank is likely to find policies to halt the currency’s gains, as it will certainly slow down the recovery in the country.
USD/CAD traded at 1.0400 as of 13:42 GMT from a previous rate of 1.0280 yesterday. CAD/JPY traded at 86.88 as of 13:43 GMT from 88.25.

Euro Rally Concerns Central Bankers

The euro continued to remain near a 14-month high versus the dollar today, as concerns regarding the current strength of the European common currency start to emerge among ECB officials, since a strong euro could jeopardize economic recovery in its member countries.
A part from currencies based in commodity exporter countries like Brazil and Australia, the euro has been benefiting from the new wave of risk appetite that has been unleashed since signs that the global slump was ending emerged in the first semesters of the current year. Even if European Central Bank officials started to make concerned declarations regarding a strong euro and a weakened dollar, investors are still opting for the euro this week, as companies like Apple Inc. posted much higher profits for the past quarter than expected, making the euro-dollar pair to flirt with the $1.50 level.
As the euro continues to gain, versus the dollar and the pound specially, the European Central Bank may start to consider other effective measures to halt its currency strong rally, as declarations from policy bankers already show a certain degree of concern. According to analysts, market sentiment towards the euro will remain bullish, and it’s unlikely that a trend reversal could take place before the end of the year unless central bankers interventions would be taken.
EUR/USD traded at 1.4967 as of 13:18 GMT from a previous rate of 1.4918 yesterday. EUR/GBP declined to 0.9090 from 0.9130.

Canadian Dollar Near Parity With Greenback

Optimism and risk appetite ignite speculations that the Canadian dollar will soon trade in parity with its U.S. counterpart, as demand for Canadian exports are rising worldwide, as well as stocks in Toronto.
The Canadian dollar is once again trading near parity with its U.S. counterpart as the greenback suffers from a decreased attractiveness, while Canadian stocks rise, benefiting from rising crude oil prices, that is trading in the highest rate for 2009 this week, providing support for the loonie to gain before a Bank of Canada meeting tomorrow.
USD/CAD traded at 1.0286 as of 11:56 GMT from a previous rate of 1.0417 when markets opened yesterday.

Dollar Rebounds on Undervaluing Speculations

The U.S. dollar had a weak performance this week reaching record lows versus the euro and the Australian dollar but managed to pare some of its losses as traders could think the current devaluation may be too severe and that it would not reflect economic fundamentals in the U.S.
The greenback managed to gain versus most of the 16 main traded currencies towards the end of this week’s session, in a movement that many analysts considered to be a corrective, profit taking from a part of traders, but at the same time could indicate a shift in the dollar trends, as fundamentals in the country are not so negative as the sentiment towards the currency.
EUR/USD closed this week at 1.4904 after touching 1.4963 during the week.

Pound Declines Further on U.K. Economic Forecast

The pound touched the lowest level in more than six months versus the euro and posted declines versus virtually all main traded currencies as forecasts suggest that interest rates in the country will remain low in the long-term, adding doubts towards the British economic future.
The Center for Economics and Business Research in the U.K. impacted the pound outlook negatively today after statements indicating that interest rates will remain at record low levels until 2011 in the British Isles, followed by a timid increase afterward, decreasing attractiveness for the already weakened British currency, which has been one of the biggest losers in currency markets this year. The United Kingdom has been one of the least resilient wealthy countries this year, proving itself unable to cope efficiently with the challenges imposed by the global slump, consequently decreasing appeal for its currency among traders, and setting the pound to new record lows this week.
Forecasts released today by the CEBR added pessimism towards the future of the British economy, since record low interest rates mean in practical terms a longer period of economic downturns in the U.K., since interest rates are maintained low when a central bank attempts to stimulate loans to consequently reignite a country’s economy. The pound is likely to remain either neutral, or to extend its losses.
GBP/USD traded at 1.5801 as of 11:14 GMT from a previous rate of 1.5853 when markets opened yesterday. EUR/GBP touched 0.9338 from 0.9284.

Yen Falls on Industrial Optimism in Europe

The Japanese currency started this week falling versus most of the 16 main traded currencies after one of the main European electronics producer posted unexpected quarterly profits, inducing traders to opt for higher-yielding positions in foreign-exchange markets.
Royal Philips Electronics NV, the biggest European electronics producer based in the Netherlands, posted a better than expected profit for this year’s third quarter, surprising traders positively, damping demand for the safety of the yen, which dropped mainly versus currencies in emergent-markets like the Mexican peso, and high-yield commodity linked currencies like the Canadian and the Australian dollar, being the latter the best performing currency in traders markets in 2009 until this moment. The yen also lost versus the greenback influenced by the same factors, since the yen is considered the safest investment in currency markets, being impacted today by an increased risk appetite among traders.
Analysts were expecting the Dutch company to post losses, but the actual results surprised traders with optimism, provoking an exodus of capital from Japan towards riskier positions around the world, following the current trend of optimism caused by economic recovery evidences which have surged globally, specially this month as Australia was the first country to raise its national benchmark interest rates.
EUR/JPY traded at 133.24 as of 10:27 GMT from a previous rate of 132.18 when markets opened yesterday. AUD/JPY followed, trading at 81.72 from 81.22.

Global Recovery Signs Hurt Dollar

The U.S. dollar declined today against the euro and the other major currencies as the global economic recovery is looking more sound with the stock markets rising and the business/consumer confidence going up worldwide.
The drop of the U.S. currency’s rate against all other popular Forex currencies is going ahead of the monetary policy decisions that are scheduled for today by the Bank of England and the European Central Bank. The current growth the euro and the pound against the greenback could already include the optimistic statements from the central banks, which would mean a probable correction in case the announcements won’t be considered that optimistic later today.
The U.S. dollar fell to the 2-week low against the euro and to the 14-month low against the Australian dollar, which is currently benefiting from the positive interest rate decision carried out earlier this week. Analysts from the JPMorgan Securities say that there is a sense in the traders’ confidence in the fact that the crisis’ bottom is now behind. Considering a better prospect for the high-yielding assets and currencies, the dollar may remain in the downtrend for a longer period.
EUR/USD rose from 1.4687 to 1.4770 as of 9:28 GMT today — its highest value since September 24. AUD/USD went up from 0.8904 to 0.9041 — the highest level since August 8th, 2008. USD/JPY continued its decline today and decreased from 88.59 to 88.25.

G-7 Comments Set Australian Dollar High

The Australian dollar posted today its first gains after a rather bearish trend last week as the Group of 7 did not confirm speculations which suggested it would stress on the importance of a strong U.S. dollar to stabilize the world economy, favoring again high-yielding currencies.
The Australian dollar has been one of the best performing currencies this year as risk appetite surged with the first signs of economic improvement in multiple parts of the world. This Monday, after a rather risk averse past week prior to the Group of 7 meeting, the Aussie managed to climb as both international and domestic factors provided support for the South Pacific currency to revert its previous losing trend. The G-7 did not give as much importance to a strong dollar as analysts expected, bringing risk appetite back to markets also adding to optimistic news in Australia, as services industry shrank less than expected in the past month.
The Aussie definitely remains as one of the best bets in currency markets for this week, according to specialists. A favorable domestic scenario combined with the G-7 meeting outcome only adds to the already optimism situation in Australia which is expecting interest rates to be raised before the end of year, attracting overseas investors to purchase Aussie priced assets.
AUD/USD traded at 0.8749 as of 12:06 GMT from an opening rate of 0.8670 yesterday. AUD/JPY also climbed, touching 78.65 from 77.53.

Dollar Loses Slightly on G-7 Comments

The dollar started this week losing versus the euro and the pound after speculations that Group of 7 central bankers would provide statements supporting the dollar were not confirmed, erasing last week gains and setting the dollar to a bearish scenario again.
Last week was marked by a good U.S. dollar performance as a G-7 meeting was expect to stress the importance of a strong greenback, as it could provide solid competitiveness for exporters around the world, specially in the Eurozone, where they have been struggling to find costumers due to the current euro’s levels. Group of 7 policy makers did not signaled that they support a strong dollar, indicating that natural market regulations are more welcome than disorderly swings in currency markets, setting the U.S. currency back to a bearish scenario, where the Australian dollar also gained significantly this Monday.
The shift in sentiment towards the dollar may set the U.S. currency to a new losing streak towards record lows according to some analysts, but even if the scenario is not the most optimistic for the greenback, other currencies, with a few exceptions, are still struggling to find their way out of recession, so the dollar bearish scenario may not impact the currency as much as it would in normal conditions, since most parts of the world are still facing a recession period.
EUR/USD traded at 1.4626 as of 11:02 GMT from an opening rate of 1.4595 yesterday. AUD/USD traded at 0.8745 from 0.8670.

Pounds Ends Another Week Down on Crisis Concerns

The pound has been one of the most affected currencies by the credit crunch last year and during the past three weeks it suffered another substantial decline as the U.K. economic scenario continues to deteriorate and this Friday risk aversion is high again pushing investors towards safety.
Today the British currency found obstacles to climb in both domestic and international economy scenarios, as risk aversion rose globally. Nationwide Building Society indicated today a worse than previous forecast for house prices increase in the U.K., raising concerns on the real estate market which was one of the most impacted by the global slump last year, especially in England. Equities markets in the U.K. and overseas also had a negative day before a G-7 meeting which may approach sensitive topics regarding the economic future in the world’s wealthiest nations, forcing investors to opt for safer assets and damping demand even further for the U.K. pound.
The situation in the U.K. and the current problematic market sentiment make of the British pound one of the worse bets available in foreign-exchange markets, as Bank of England’s inefficiency to cope with financial problems in the country becomes more evident by the day, damping demand for the British currency which is likely to remain unattractive for a while.
GBP/USD traded at 1.5851 as of 10:49 GMT from a previous rate of 1.5966. EUR/GBP traded at 0.9173 from 0.9109.

Dollar Climbs on Grim Economic Forecasts

The dollar kept its previous days trend gaining versus the euro and high-yielding currencies as forecasts suggest that loan defaults and unemployment rates will keep deteriorating, raising risk aversion and adding attractiveness for the safe profile of the greenback.
An expected rise in unemployment figures, and a still very complicated credit situation in the United States rose concerns among traders regarding the economic recovery in North America and consequently in a global dimension, slashing earlier gains this week for higher-yielding currencies and favoring currencies with a relative safe profile, as the U.S. dollar and the yen. The dollar is likely to end today’s session setting a second week of gains versus the euro, as the current strength of the Eurozone currency is already raising policy makers concerns, as it decreases competitiveness for European products and could slow down the economic rebound in the region.
A negative day in stocks and commodities while market sentiment impacted by U.S. employment figures and the Group of 7 meeting which may approach sensitive topics are providing support for the dollar tor remain strong in the short-term at least. If concerns regarding a strong euro be confirmed in the G-7 meeting, the dollar may extend gains versus the euro during the next week.
EUR/USD traded at 1.4543 as of 9:47 GMT from a previous rate of 1.4565 yesterday. USD/CAD traded at 1.0894 from 1.0747.