Forex Trading News September 2009

The US economy possibly operates slower than demonstrated in equity markets, which could result in a correction in stocks, according to Michael Spence, the economist famous for his job-market signaling model. The stabilization of economic expansion in the North American nation has been “overused” by investors, the Nobel Prize-winning economist commented in an interview last Monday. It is not likely that the world’s largest economy will face a “double-dip” deceleration even if this risk continues, according to Spence. The American economist is currently in Malaysia for the prestigious Forbes Global CEO Conference held in Kuala Lumpur, from September 28th to 30th.

The Aussie, an informal term for the Australian Dollar, has posted one of the 5 best results as the worldwide economy started to improve and as a result of speculations concerning a possible interest rate hike, driving the South Pacific currency to rise against its main rivals today. Rumors about an interest rate rise boosted Australia’s currency to climb for a third consecutive day, pushing the Aussie up to the highest level in more than a year against the majority of all six main traded currencies.

The Chinese economy recovers at a strong pace on the back of a lending boom in the first six months of this year and due to government procurement, while Chinese industrial businesses’ profits declined. In the period that ended August 31, net income fell 10.6% from the corresponding period of the previous year, reported the statistics bureau this Monday. Profits fell 22.9% during the first five months of 2009.

The Loonie, an informal term for the Canadian Dollar, posted this week one of the weakest results in months due to falling raw materials rates at the end of this week’s trading session, affecting the forecast for the North American currency, since crude oil is one of Canada’s most important export products. The Group of Twenty Finance Ministers and Central Bank Governors (G-20) assembly impacted markets at the end of this week, while the Japanese Yen posted one of the best results in foreign-exchange markets, reaching the highest level in seven months on the back of the G-20 statements.

The German business climate index climbed to a one-year high in September, suggesting that the bloc’s wealthiest country, Germany, is recovering from the most intense slump since the Second World War. The Ifo Institute for Economic Research, headquartered in Munich, reported this Thursday that its business climate index, based on a study among 7.000 executives, climbed to 91.3 from 90.5 in August; the strongest level since September 2008, while economists forecasted a rise to 92, according to the median of 40 outlooks in a study. In March this year, the index showed a reading of 82.2; the weakest level in 26 years.

The Greenback remains frustrated by increasing risk seeking this week, resulting in the weakest levels this year against many currencies in almost all global economic areas, due to traders seeking risks and investing in more-profitable assets. It remains unclear and difficult to estimate how long the risk appetite will continue

Ivan Sramko, governor of the central bank of Slovakia (NBS) and council member of the European Central Bank (ECB) stated that the ECB will take further steps to stimulate the economy if the improvement stagnates. South Africa’s currency pared the losses that it made earlier this Tuesday’s trading session as speculations indicate that the national interest rates will be maintained, alluring investors to inject in South African assets.

The New Zealand Dollar, often called Kiwi Dollar, reached an eleven-month record high against the US Dollar and rose against the majority of the 16 most popular currencies due to global and local factors, alluring traders to invest in New Zealand Dollar-priced assets. The Kiwi posted one of the best results in the Forex market this Tuesday.

Dean Maki, head of US economic research and chief US economist at Barclays Capital, stated that employment in the US will improve towards the end of 2009 on the back of the recovering economy. The Pound Sterling reached unprecedented low levels against the Single Currency and the Greenback after the Bank of England confirmed that the long-term rates for its national currency could have suffered a devaluation, caused by the slump, on which Pound-priced investments became less appealing for traders.

The Brazilian Real posted a third consecutive week of rises against the US Dollar and numerous other important currencies due to risk seeking investors and a positive sentiment, which attracted investors to the fifth largest country of the world. Furthermore, the Real rose versus the British Pound as the nation’s financial system remains critical.

The Central Bank of the Republic of Turkey cut its benchmark interest rate by half of a percentage point as it also stated that it may continue the most rigorous cycle of reductions among the G-20 countries, while inflation shows the weakest pace in almost four decades. Turkey’s central bank cut its overnight borrowing rate to an unprecedented 7.25% this Thursday. The bank in Ankara will publish its minutes of the assembly in eight working days.

The central bank of Japan will probably remain the benchmark interest rate close to 0% this Wednesday as it also will continue the emergency lending programs due to the economic improvement losing steam. A survey among 23 economists demonstrates that Masaaki Shirakawa, governor of the Bank of Japan, will remain the overnight lending rate at 0.1%. The Bank of Japan will not reveal future policy measures as it already prolonged the programs that aim on credit easing until the end of 2009.

The Russian Ruble gained on the back of rising commodities rates as a result of increasing confidence among investors, on which Russian trading options became more attractive in worldwide markets, providing support for the rates of the Russian currency. Another rate cut also favored the Ruble.

Various economic data indicated today that the North American economy could be improving, on which the Japanese Yen dropped versus the Greenback, as investors starting to prefer Dollar-priced trading options instead of the relative safety of the Yen in times of uncertainties. The US Dollar may be undervalued according to some currency analysts.

The Greenback Dollar posted this week exceptionally negative results as it reached various record lows against the majority of the 16 most traded currencies on the back of increasing demand for high-yielding assets and due to rising confidence among traders globally, boosted by two Chinese reports and already increasing optimism in trading markets.

According to the ITEM Club, Independent Treasury Economic Model, the UK will face another property crisis in 2010 as the availability of loans for house purchase remains constrained. In the first six months of 2010 prices will drop moderately, while they will remain stable for two years, the report by Ernst & Young LLC’s Item Club showed. Mortgage lending could “continue to be expensive and limited” due to banks reconfiguring their assets and liabilities as the economy is finding its path out of recession, the Independent Treasury Economic Model reported.

The Brazilian Real reached the highest level in one year against the US Dollar this week, followed by a corrective decline due to expectations indicating that the largest economy in South America may not contribute to an extended rise of the Real. Mexico’s Peso gained during this week’s trading session on the back of rising risk appetite in global trading markets increasing the demand for emerging currencies, while this Saturday, the Peso dropped as a result of the opposition party’s point of view towards new laws that will result in higher taxes.

The US Dollar rose this Wednesday as speculations refreshed investors that the present gains in stock markets may not correspond with the actual potential of global economic and corporate expansion. The Greenback’s rebound came after yesterday’s plunge on the back of traders seeking high-yielding equities worldwide.

House prices in the 70 largest Chinese cities showed the strongest rise in almost one year due to increasing confidence and record lending. China’s house prices inflated by 2% in August from the corresponding period of the previous year, twice as high as the increase in the previous month, reported the National Bureau of Statistics of China this Thursday. Investment in real estate and sales rose strongly in August in comparison with July, according to the National Bureau of Statistics.

The South African economy is threatened by deindustrialization as the worldwide recession and a rebounding Rand already weaken companies that are already affected by high wage expenses and suffer from a lack of skilled workers. On September 10, a government report will be released that will demonstrate a 16.4% decline in industry in July from the corresponding period of the previous year. Rob Davies, South Africa’s trade minister, commented on June 30 that the nation could lose much of its industry base and tens of thousands of jobs.

The Australian Dollar reaches the strongest levels this year as the Group of Twenty Finance Ministers and Central Bank Governors (G-20) confirmed that economic incentives will continue to stimulate the world economy, increasing the attractiveness of higher-return assets such as the Aussie.

With equities and commodities rising and resumed optimism among traders, the Canadian Dollar continued its rally at the end of this week’s trading session. The Loonie also benefited from positive data from the US and Canada. The Group of Twenty Finance Ministers and Central Bank Governors (G20) affirmed that the worldwide economy becomes more stable, while it’s too early to retrieve incentives and the focus should be on creating exit plans, commented German junior finance minister Joerg Asmussen today.

Earlier this week the Brazilian Real lost the majority of its prior two months gains, while today it climbed further from yesterday, prompted by predictions demonstrating that seven of the main global economies will show a less considerable decline. The Loonie rose strongly today, after reaching the weakest level in nearly two months, as a result of a report implicating that employment in Canada increases, which was unexpected but positive news for traders and analysts.

The Swedish Krona fell this Thursday against the European common currency and the majority of the 16 most popular currencies as a result of the Swedish central bank maintaining its interest rate level at the lowest level in the history of 0.25%, resulting in suggestions that the condition of the Swedish financial remains complex. The Single Currency started this week rather gloomy, while it rose today due to better forecasts for the Eurozone economy, demonstrating an economic expansion that exceeds earlier outlooks, boosting the demand for the European common currency.