EU confidence favors Real and Loonie extends gains

08-23-2009 10:02

The Brazilian currency, which posts the best results among the emerging currencies, gained this Friday on the back of optimistic Purchasing Managers Index (PMI) figures, prompting traders to seek higher-yielding investments betting on the fact that the economic improvement has yet begun. The Loonie continued to rise today, while the Yen declined towards the end of this week’s trading session.

European confidence

Real’s trading week consisted of declines due to various events primarily in the US and China, which led to investors seeking secure assets this week, favoring mainly the Japanese currency due to its safe-haven status. After the French and German economies grew in the second quarter, today they posted optimistic Purchasing Managers Index numbers. Especially the German economy demonstrated results that exceeded specialists’ estimations, which generated a bullish pattern in equity markets worldwide, enabling emerging currencies such as the Brazilian Real and South Africa’s Rand to gain at the end of this week’s trading session.

Real favored

The strongly desired recovery of the global economy, if validated, will probably favor the Real even more with rising Brazilian exports, mostly metallic commodity goods and agriculture, as a result of recovering economies. In the meantime, traders seek Real-priced investments in order to obtain higher returns, supporting the Real’s forecasts.

Loonie extends gains

The Canadian currency continued to rise this Friday on the back of growing confidence globally regarding the strongly desired economic revival, increasing prices of commodity goods that affect the Canadian Dollar’s rates. Ben Bernanke, chairman of the board of governors of the Federal Reserve, confirmed that the worldwide recession could be bottoming, resulting in a bullish sentiment in stock exchanges and commodity markets, rising the attractiveness of higher-yielding investments and diminishing demand for the Japanese Yen and US Dollar. The Canadian Dollar is one of the most vulnerable currencies to equities, while it tapped the strongest level in 2 weeks as a result of today’s flow of risk appetite.

Yen falls

At the end of this week’s trading session, the Japanese Yen fell as US home sales numbers improved, indicating that the world’s strongest economy is leaving the deepest slump in decades. Markets were impacted by Bernanke’s comment that the global economy is improving as optimistic US housing figures increased demand for higher-yielding assets, diminishing demand for the Japanese Yen.