Forex Trading News October 2009

The Japanese Yen climbed versus the Greenback this Friday, while the USD/ JPY pair was corrected yesterday, as currency traders expect Japanese exporting firms to perform a possible funds repatriation. The Brazilian Real posted one of the biggest gains against the Greenback this Friday due to domestic and international economic conditions.

The economic growth in the third quarter is a sign that the slump is weakening, according to US President Barack Obama. However, a lot of work remains to be done before the US economy operates at full throttle, as recovered job generation will be a crucial indicator, Obama stated.

Angel Gurria, secretary general of the Organization for Economic Co-operation and Development (OECD), commented that countries should preserve economic stimulus to stimulate their economies, as fluctuating oil rates and a further contraction of the US housing market hinder the worldwide recovery.

Canada’s central bank, Banque du Canada, should opt for currency intervention to stabilize the rate of the Canadian Dollar in order to prevent that Canada’s manufacturing market hollows out, according to Avery Shenfeld, senior economist at CIBC World Markets Inc. “Business plant and equipment may be reduced by a strong Canadian Dollar if it’s overvalued during a number of years,” Shenfeld commented.

Equities rose slightly in early trading today, as the key averages climbed after last week’s drop. However, obtaining stocks was not very popular at the start of today’s trading session. The FSA announced that the main UK-based banks agreed to implement a new code for financial reporting disclosure.

The performance of the UK economy did not correspond with the estimations by analysts, which forecasted that the British economy would be the next European country to leave the recession behind, as it contracted another 0.4% in the third quarter. Especially the recession in the financial sector and real estate sector affected the British economy.

German business sentiment climbed slightly in October, while the eurozone output rose at the fastest pace since the end of 2007 this month. The initial eurozone composite output index climbed to 53.0 this month, while September showed a reading of 51.1. Output in the private sector rose for the third straight month, which was the largest increase since late 2007.

The current economic growth may not be sustainable, despite the fact that recent figures demonstrated that the US economy has left the most intense period of the economic slump behind. The gloomy situation of the US labor market will lead to lower consumer spending, which will have a negative influence on economic growth.

The Frankfurt-based Deutsche Bank AG reported that its third-quarter results surpassed analysts’ forecasts as they more than tripled, spurred by tax gains. Germany’s largest bank stated this Wednesday that preliminary net income climbed to €1.4 billion ($2.1 billion) in contrast to €435 million the corresponding period of the previous year, while the median forecast of 12 analysts demonstrated a net income of €811 million.

The Single Currency remained near the highest rate in 14 months against the Greenback this Tuesday, while concerns over the current strong levels of the Euro arise among European Central Bank policymakers, as a strong European Common Currency may hinder the economic recovery of the Euro nations.

The jobless rate in Hong Kong fell, corrected for seasonal influences, to 5.3% in the period July – September in comparison to 5.4% in the period June – August, reported the Census and Statistics Department today. It was the initial decrease after the worldwide financial crisis started in August 2008, while economists forecasted an unchanged rate of 5.4%.

Investors doubted if an $8-per-barrel rally since last week’s trading session was guaranteed as worldwide oil equities continue their high rates, on which crude oil prices dropped while they posted the highest level in a year, $78 per barrel, yesterday.
The US has the highest energy consumption in the world and its crude oil and refined products stocks are still above the levels of last year. Sucden Financial trader Rob Montefusco commented: “It’s not attractive to buy oil if you consider the large inventories of crude oil.”

The American Congress provided its President legislation that excludes overseas firms that sell fuel to the Islamic Republic of Iran from holding US gasoline contracts. These sanctions are the result of Iran’s notorious uranium enrichment plan, which forced the US to create unilateral embargoes.

UBS AG, Europe’s second-largest bank, revealed today the results of the Quarterly Business Cycle Indicator survey, which showed that the economy of Switzerland has left the recession behind and is likely to grow in the last quarter of this year. The survey indicated that economic growth will return in the Swiss economy.

Dr. Chakravarthi Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, believes that the Republic of India is likely to preserve its economic stimulus during the year that ends March 31, while it is not expected that the Central Bank of India will alter its “accommodative” fiscal policy at this moment.

The Pound Sterling continues to lose against the majority of the most-popular currencies in the Forex market on the back of expectations that the Bank of England could prolong its asset-purchase program to boost the UK’s economy devalued attractiveness of the British currency.

The Reserve Bank of New Zealand is expected to start a “rigorous” cycle of benchmark interest rate hikes, according to financial services firm JPMorgan Chase. Alan Bollard, governor of the New Zealand central bank, will probably maintain the official cash rate of 2.5% as he will increase it to 4% towards the end of next year, JP Morgan economist Helen Kevans commented. The economist forecasts interest rate hikes of 0.50 percentage points in July and September as the initial rate increases.

The Australian Dollar climbed to the highest rate in two months versus the Japanese Yen this Saturday after speculations suggested that carry trade may be the result of the interest rate increment by the Reserve Bank of Australia. Currently, the Japanese Yen is being traded at exceptionally high levels versus the Greenback and the main currencies.

Pessimistic figures affected the Pound Sterling once again as it dropped against the Single Currency and Swiss Franc due to British manufacturing decreasing to the weakest level in more than ten years, increasing doubts about the economic prospects for the UK. Expectations that the global economy recovers faster than earlier was forecasted drove equities and commodities higher this Tuesday, thus boosting the Loonie, an informal term for the Canadian Dollar, to gain against the Greenback.

Last week, the Brazilian Real lost against the US Dollar ahead of the Group of 7 finance ministers assembly, while it now creates a favorable scenario for higher return currencies to gain, driving the Brazilian currency in Forex markets. Chilean equities gained more than 1% today, reaching rates close to the highest levels in two years on the back of climbing stocks worldwide providing support for retail and commodity equities, according to currency traders.

The Greenback posted one of the best results in months against the majority of the 16 most popular currencies during this week’s trading session, as a result of the G-7 indicating that a strong US Dollar is fundamental for the stabilization of the global economy. The US is one of Chili’s most important trading partners and pessimistic data from the North American country at the end of this week had a negative impact on the Chilean Peso.

Hong Kong’s pegged exchange rate will be maintained, pledged Norman Chan, the new head of the Hong Kong Monetary Authority (HKMA), as the Bank of China intervened for the first time under Chan’s regime in order to end the Hong Kong Dollar rally. The HKMA Chief Executive commented that his initial mission was “to preserve the stability of the currency market by means of upholding our pegged exchange-rate model.”

The Single Currency has posted one of the best results so far this year among the main traded currencies, while it dropped this Thursday ahead of speculations indicating that this week’s G-7 meeting will discuss the current strength of the Euro, increasing concerns and declining attractiveness for the Common European Currency. Mexico’s Peso fell today due to decreasing crude oil rates and disappointing unemployment data in the United States.