Canadian Dollar Pare Gains on Risk Aversion

In the end of this week’s session the Canadian dollar pared its previous gains as risk aversion rose this Friday, affecting U.S. stocks performance and also the crude oil, the main Canadian commodity exported to the United States, influencing the loonie’s outlook.
The Canadian currency rose 12 percent versus its U.S. counterpart this year, and since June, Bank of Canada officials are stressing on the fact that a very strong loonie may bring a negative impact to national exporters, and measures to be taken are not ruled out, if the loonie climb further. This month the Canadian currency has been one of the biggest losers versus its U.S. counterpart among the 16 most traded currencies in foreign-exchange markets, losing 1.3 percent as this week ended, which is certainly a favorable scenario for Canadian exporters.
The rally perceived in the beginning of the month which set the loonie to around 1.07 per U.S. dollar raised eyebrows in the Bank of Canada, considering that a stronger currency decreases competitiveness for one nation’s products, with statements regarding this fact already helping to prevent the rally to continue temporarily. It is unlikely that the loonie will rise further, as the national bank already announced that it will take measures to stop its climb, so a rather neutral or bearish trend can be expected for the Canadian currency in the short term.
USD/CAD closed this week at 1.0913 from a previous rate of 1.0863 on Thursday.

Poland’s Economic Outlook Provide Support for Zloty

The Polish currency extended last week’s gain this week as the Eastern European nation is showing one of the quickest recoveries in the region, increasing attractiveness for the zloty regionally.
After growing beyond economists expectations for the last quarter, Poland is being considering one of the most solid economies in the region, fact which is favorable for the zloty to gain versus several currencies, but mainly against the euro as the Polish currency suffered a severe devaluation during the worse moments of the global slump. The Polish currency climbed for a second week in a row on the country’s economic outlook.
EUR/PLN closed at 4.0923 from a previous rate of 4.1162 yesterday.

Yen Gains on New Tax Law

The Japanese currency extended its weekly gains today on speculations that Japanese investors are bringing overseas investments capital back to the country to profit from a new tax law, making the yen to climb further in an already pessimistic scenario.
Various factors provided support for the yen to gain for the third day in a row versus most of the 16 most traded currencies as today speculations indicated that last quarter’s GDP figures in the United States will indicate a deeper recession than in previous one, fact which is spurring demand for the relative safety of the Japanese currency. The pound also declined versus the yen as Japanese exporters are repatriating assets to the country to benefit from new tax regulations, even if the highest rise in home prices was posted today in the United Kingdom.
Analysts indicate that this week’s gains for the Japanese currency are very much related to new Chinese regulations approved in order to avoid further chaotic financial episodes in the country, but provoking side effects of pessimism in trading markets. Today’s quarterly U.S. GDP report is also causing market sentiment to have a bearish tone, since a longer recession in the U.S. would certainly rise risk aversion among traders, a yen positive factor.
GBP/JPY traded at 151.50 as of 10:46 GMT from a previous rate of 153.45 yesterday. EUR/JPY followed, from 134.51 to a current price of 133.52.

Pound Down on Chinese Comments

The U.K. currency posted losses today versus the euro and the greenback as stocks declined in the country and the Chinese Premier Wen Jiabao affirmed that the world economy is still facing a period of uncertainty, which brought risk aversion back in trading markets.
A reversal trend in equities markets pushed the British currency down and the MSCI World Index lost consistently mainly influenced by Asian stocks, who had a negative day after Chinese Premier Wen Jiabao made pessimist remarks towards the future of the world economy. The pound also lost consistently versus the euro as the Eurozone economy is showing signs of better economic performance than the British Isles, fact which is leaving room for speculations that interest rates will remain at record low levels set by the Bank of England this year.
p;Chinese declarations today affected the already faltering performance of the British currency, which is still declining as a consequence of BOE’s quantitative easing policies, which so far have been unable to rescue the U.K.’s economy from the worst recession in 60 years. The pound is likely to remain bearish unless the economy in the United Kingdom starts to show solid evidences of recovery, which haven’t been the case so far.
GBP/USD traded at 1.6372 as of 10:36 GMT from a intraday rate of 1.6494. EUR/GBP rose to 0.8728 from 0.8677.

Hungarian Forint Declines on Interest Rate Speculations

The forint is starting this week under pressure falling from the highest level in almost 10 days before the Hungarian central bank meeting today, which is likely to slash the national benchmark interest rate to a record low for the country since the end of the socialist era.
The Hungarian central bank will publish its decision regarding the current interest rate levels today at noon, GMT time, and according to most economists the Central European nation is likely to cut the rates to a record low of 8 percent from the present 8.5 percent, the highest in the European Union together with its neighboring country, Romania. The speculations regarding the interest rates are forcing the forint down as it can be understood that current government efforts to stimulate the economy are not being sufficient to revive Hungary from its worst recession in 18 years, as unemployment doubled since last year, and the IMF bailout was not enough to revive growth in the nation.
Analysts indicate that even if speculations are suggesting a 0.5 percent slash for the national interest rates in Hungary, the central bank may once again surprise economists as the previous time and go for a full 1 percent cut, which would be definitely worse for the forint’s performance.
EUR/HUF traded at 268.70 as of 10:21 GMT from an opening rate today in Budapest of 268.50. USD/HUF followed the same trend climbing slightly to 187.68.

Will the Dollar Rebound This Week?

The U.S. currency lost towards the end of the past week as several factors improved investors’ confidence worldwide, attracting investors to emergent-market currencies, as commodities and stocks surged fueled by positive reports in Europe and Asia, shunning investors from greenback priced assets.
Last week’s end was predominantly optimistic in markets around the world, mainly with Germany and France posting signs of economic growth as PMI increased in both countries and as Federal Reserve Chairman Ben Bernanke stated that the recession is easing adding to the already risk driven attitude among traders globally. The greenback suffered significant losses due to this new wave of risk appetite, since the global slump easing is reflecting in higher-yielding assets appreciation, which declines attractiveness for the relative safety of the greenback.
The forecast for this week regarding the U.S. dollar will rely mainly on reports to be released in Wednesday, when new home sales and durable good orders will be published, and mainly on Thursday, when the quarterly gross domestic product performance is due to be released together with unemployment claims, which are likely to reflect positively for the greenback if the data comes beyond expectations, mostly regarding the GDP, which is forecast to indicate a decrease in the U.S. recession figures, but still remain in the negative field.
EUR/USD ended the week traded at 1.4328. GBP/USD closed at 1.6501.

German Manufacturing Provides Support for Euro Climb

Germany and France posted favorable reports today indicating that the wealthiest countries in the Eurozone may be finding its way out of recession, evidence which helped the euro to gain versus several currencies towards the end of this week’s session.
After surprising economists worldwide several days ago when Germany and France posted an unexpected growth for the second quarter, today, the strongest economies in the Eurozone bloc posted a rise in manufacturing and services industries, once again going beyond estimations and bringing optimism suggesting that the current recession in the region may be having its final days. The PMI numbers were not sufficient to make the euro to rally versus the yen, since China affirmed that it may restrict capital requirements for domestic banks, causing an instant negative reaction in Asian stocks, which is a yen positive factor.
Analysts evaluate the current market reaction to European PMI numbers as a short-term market impulse, even though the data provided are solid and indeed an evidence of economic improvements, mainly in Germany, while France performed less positively in these reports. Germany is the Eurozone’s economic heart, and when the country finds its way out of recession the Euro is like to be bullish.
EUR/USD traded at 1.4303 as of 9:55 GMT from a previous rate of 1.4237 in the intraday comparison. EUR/JPY traded near neutrality from yesterday’s rate at 134.12.