Archive for the Forex Guide

Stock gains pushed US dollar up against yen
Monday, October 13th, 2008

On Tuesday, dollar moved up session high as strengthened by recovery in stock bazaar of US with the rise in technology shares. A gain in US equities was observed buoyed by $700-billion rescue scheme of government of United States.

Investors are hoping that the bailout package will help in soothing down the lending as well as strengthen the capital spending.

After trading half percent up at 105.94 on Monday, dollar rose session high at 105.99 against the yen at EBS.

Director of foreign exchange trading at Scotia Capital in Toronto, Steven Butler, said that according to the scenario it looks like the trading sector is being forced to buy US currency. He also said that while the rise in stocks is easing the market, it still doesn’t t mean much as the market is unstable.


On Monday the Australian dollar rose to a three-week high
Tuesday, October 7th, 2008

Maintaining the craving for high yielding currencies after the government of America declared a plan that will help in stabilizing worn out financial system, on Monday the Australian dollar witnessed a three-week high. In a week three-year Australian bond futures posted their major one day downfall with a loss of 0.22 points at 94.44 along with the ten year bond contract came down 0.254 points to 94.194.

With the investors came back to their trades, the Australian Dollar also increased as compared to the yen. The local currency was at 88.43 yen off at 89.78 which is a two-week high of 89.78, but up from 86.59 on Friday. It was around 4:10 p.m. that the Australian dollar was at $0.8299 as compared to American dollar, already raised to $0.8402 which was a three week high earlier.

On September 17th the Australian dollar came down to $0.7799 which was one-year low with the credit markets witnessed disorder of the carry trades. It also reduced the whole viewpoint of universal development and prices for the goods/services. On Friday the American Treasury moved to settle the financial markets, with a plan worth $700 billion for the purchasing of the bad mortgage related liabilities from various financial institutions. This also included American units of foreign banks in an attempt to stem the most awful financial crisis.

According to Mr. Joseph Capurso who is a currency strategist at Commonwealth Bank, risk hunger has been strengthened considerably on American news and with this the markets has been confident that a major upset may be saved. If the plans are accepted by the market then there are probabilities that this week we can witness a rise in the Australian dollar.

After the investment bank Lehman Brothers fell down the American package came up, the Federal Reserve gave $84 billion in help to American International Group and Treasury took over the mortgage leaders Fannie Mae and Freddie Mae. Morgan Stanley and Goldman Sachs also renounced their status of investment banking to be converted into bank holding companies those are controlled by American Federal Reserve for providing security in financial scarcity.

The Australian dollar also increased with the high prices of commodity along with the increase in oil prices which is stable over $104 a barrel and the gold with $867 per ounce. For the past few years Australia has been very good with the resources and is a big exporter of products/services. On Monday Australian Bureau of Agricultural and Resource Economics was of the view that both the iron ore and copper will be going ahead from its previous predictions.


Morgan Stanley signs a letter to sell 20% stake
Tuesday, October 7th, 2008

On Monday, Morgan Stanley announced that a letter has been signed with objective of selling of 20 percent of the firm to Mitsubishi UFJ Financial Group Inc.

The firm did not disclose the financial terms of the deal. While the letter signed by the banks is said to be nonbinding, Morgan Stanley hopes to raise a price based on its book value following the completion of diligence review by the largest bank of Japan, if the deal is done.

The whole idea of the deal comes after the approval from fed to Morgan Stanley for becoming a bank holding firm. This major investment bank of Wall Street was allowed by Federal Reserve to become commercial bank in order to accept deposits. Now, this key firm of Wall Street will not be regulated by Securities and Exchange Commission anymore; instead will come under the Federal Reserve.

Morgan Stanley’s chairman and chief executive, John Mack, in a statement said that the deal would give opportunity to grow to both the banks as well as chance to make it big globally. He also added that the partnership would help the changeover of Morgan Stanley to a commercial bank as well as give a financial support to the firm in shoring its capital base in the time of credit crisis.

Past week has been busy with reports of sale of Merrill Lynch & Co to Bank of America, filing of bankruptcy by Lehman Brothers Holdings Inc and selling of Morgan Stanley.


Indian Rupee touches 2 year low against greenback
Monday, October 6th, 2008

Rupee reclaimed its ground at 45.85/86 against US dollar, after it lowered down in early trade with a two year low of 46. The gain had been a result of drop in local stocks and dollar’s weak position in abroad.

The Indian rupee strengthen at 45.53/55 against dollar after it had a close of 45.75/76 and later the currency reached 45.46, pushed by fall of dollar against major currencies. Although in late morning trade, rupee dropped to 45.85/86 against dollar, a level last reached in 10th October 2006 with a close of 45.80/81 a dollar.

In early trade, the Indian currency was found 25 paise down to 46 in opposition to greenback. According to foreign exchange dealers, the outcome of rupee hitting a low is a result of fall of Asian stocks as well as fine amount of dollar purchase done by banks.


Greek Unemployed Rate Falls to 10 Yr Low In 2Q
Friday, October 3rd, 2008

The quarterly unemployment rate of Greece came down to 7.1% in the second quarter of the year and the most striking part is that it is their ten year low. According to the data available from National Statistics Service on Thursday, it came down from 8.2% rate in the first quarter. According to the available data there was an ongoing job increase in just about all the industries and areas and brought continual unemployment rate in order with the Euro-zone averages in Greece.

According to a statement by Manolis Kontopyrakis who is the chief of the statistics services, with this data we are very pleased that we are experiencing a downfall in unemployment in all areas and sectors of the country. He also added that we have sufficient facts and figures to make a prediction that in the coming two quarters the ratio of unemployment will fall down more. This is for the first time that the yearly rate of unemployment for the current year will be below eight percent since the analysis got began in the year 1998.

Especially for the current year Mr. Manolis made a prediction that the standard rate of unemployment would be 7.7%. According to the new received data as compared to first quarter’s 4.50 million, the number of employed went up to 4.56 million in the second quarter. In the second quarter the unemployment rate for male was 4.6% which also witnessed a downfall from a 5.4%. As for the females the unemployment came down to 10.8% which was earlier 12.2%

Going according to the age group, the unemployment rate mainly comprised of the young population, here also the unemployment for the age group between 15-24 age groups came down to 15.4% in the second quarter which was 17.3% in the first quarter. Going according to the region in the year’s first three months main unemployment rate was in the industrial region of Western Macedonia where the unemployment was 12.3% which came down a little from 12.5%.

The islands of northern Aegean having the lowest unemployment rate, here also the unemployment fell to 4.1% in the second quarter earlier which was 5.3%. Attica where half of the Greek population lives, unemployment rate came down to 6.0% in the second quarter from 6.5% in the first.

Greece is happy with a healthy economic growth i.e. of 3.4% in the second quarter so far which is not influenced by any financial problems. But the employment opportunities stayed poor and were quite behind the average mark.


Dollar falls as Lehman talks of filing for Bankruptcy
Wednesday, October 1st, 2008

Monday witnessed a fall in US currency in Asian trade bazaar, as Lehman Brothers statement raised concerns regarding stability of financial system of United States. The Brothers sparked possibility of rate cut by Federal Reserve, by confirming about their plans for filing for bankruptcy.

From Friday’s closing point of 107.86, US dollar fell 2.3 percent down at 105.45 yen . Whereas the euro stumbled from 153.43 to 152.26 yen. With trade being thin during holiday in Japan, yen gained heavy with investors hanging on to it. Yen hasn’t gained this big since 2002.

On Sunday, chain of urgent and emergency actions was taken by Federal Reserve. The measures were aimed at controlling economical markets as well as to calm down commotion or disturbance following the end of Lehman. Out of the steps measures, one major step was to take equities the same as collateral. According to this change, equities will taken as collateral in support of cash at special credit facility. Fed has taken such step first time in its history so far.

Head of investment research at Bank Julius Baer, V. Anantha Nageswaran, called Federal Reserve’s such ability as a negative point for the United States currency. On Monday, Treasuries scaled on to the concern regarding Lehman, as the measures for rescuing Wall Street investment bank weakened along with the talks that insurer AIG was in quest for urgent funding. According to the statement made by Lehman Brothers, the firm would file for economic failure. Lehman also added that the filing would not include any of its broker-dealer subsidiaries.

In the meantime, reports came regarding acquirement of Merrill Lynch & Co Inc by Bank of America Corp for an amount of $44 billion.

Head of bond fund Pimco, bill gross, said that the decision of filing for bankruptcy could lead to turbulence in the market.


America faces business differences against China
Tuesday, September 30th, 2008

According to China’s WTO mission on Friday, China has started a dispute against America at WTO (World Trade Organization) over the American actions of importing certain steel pipes, woven sacks, and tyres. According to a statement, believing that two-sided discussion between China and America failed to resolve the problems of China. China had asked for consultation with America under the WTO dispute settlement mechanism concerning those measures.

This is the second trade case that was initiated by China. It is evident that it was in the previous year’s month of September when China challenged the actions of America against their imports of coated sheet paper. One of the Chinese officials was of the view that going according to the consultations under WTO dispute method with America, Washington had ruled out that there is in fact no danger to the American business of paper and for that case there are no actions that needs to be used.

Without going to WTO panel China solved the case in their favor, though WTO didn’t gave any sort of confirmation that the case was really solved. It was the year of 2002 when China joined the case, after few months of joining the WTO, started by European Union against American actions on steel imports which afterwards America lost. China being the second largest exporter regularly has to face trade issues and America challenged China so many times from importing taxes on car parts to the safeguarding of the intellectual property.

It was the July’s unsuccessful ministerial talk looking for a get through in WTO’s Doha round where China conflicted with America over America calls to get rid of the taxes in some of the industrial areas and suggestions to protect the countries from the impact of agricultural tax cuts. According to mission statement, China has time after time showed their concern to America about the Commerce Department actions undertaking unjustly pricing, Chinese subsidies for various products, and imports. These include- round welded carbon quality steel pipe, laminated woven sacks, light-walled pipes and tubes in rectangular shape, and new pneumatic off-road tyres.

Week high rise in Taiwan Dollar
Thursday, September 25th, 2008

Monday witness a week high rise in Taiwan Dollar on quick foreign finance inflows following a stock market pushed forward, due to intervention to lift the local currency by central bank. Taiwan Dollar augmented to around T$31.498 to USD, which is 1.2 percent higher to T$31.875 i.e. the close of Friday.

The soaring point of the day was also the strongest intraday level ever since September 1. The Taiwan dollar had soared to a high of T$31.610, by 0239 GMT. At the first hour and 30 minutes, the main Taipei Forex Inc exchange volume was $896 million, which was $426 million higher than what it was at the same period in preceding session.

After trending down for last few months following the weak status of stock market, on Monday the Taiwan Dollar recovered from its losses. However, the currency is stills 5.3 percent low since it touched a 10-1/2-year high of T$30.

According dealers in Taipei, the Taiwan dollar has experienced a huge push following the improvement in Taiwan stocks, which got its boost due to foreign fund buying. With central bank trying to support and sustain Taiwan Dollar for last few months, officials on Friday made calls to dealers inquiring about USD purchases with currency hitting six and half month lows. Many dealers said the move of central bank of Taiwan calling up to inquire about USD was intended to make sure the Taiwan currency does not deteriorate or weakens after hitting six and half months lows.

With six-month NDFs quoted at -0.430/-0.380 in contrast to Friday’s session of -0.180/-0.130, USD sales were in on the go momentum, in non-deliverable forwards market. This clearly meant that the investors believed in huge degree strengthening of Taiwan Dollar, in half a year. From the last close of T$31.903, Taiwan Dollar toughened to T$31.610 to the USD on smaller Cosmos exchange.


Traders look forward to ECB and Boe, as the dollar trips
Tuesday, September 23rd, 2008

With traders locking in profit from the remarkable gains by dollar in last few weeks, Thursday saw the currency slipping down the board. As the dollar slipped, investors anticipated interest rate judgments by European Central Bank and Bank of England.

On Wednesday Euro touched an eight month low, as the US currency positioned itself to smash a five-day winning line. After the rate pronouncement, traders were left to anticipate any comments from Jean-Claude Trichet, the ECB president.

The rates are being left unchanged by ECB at 4.25 percent. While re-leaping collateral regulations, it is being anticipated that ECB might issue new set of financial or economical projections. The rate announcement is expected to come at 1145 GMT prior to a news conference of Jean-Claude Trichet.

Analysts and experts are expecting Jean-Claude to steady his acknowledgment slow and lower growth with a strict and sturdy attitude on the consequences of knock-on price rise.
Strategist at RBS Global Banking, Paul Robson, said that people hoping that Jean-Claude would maintain his tough attitude. He said that the new collateral regulations as well as the higher inflation outlook and descending growth prediction is expected to offered mixture of policy issues for the market and experts to think over, which might add to instability of euro.

Robson also added that the day of unchanged rates in UK and euroland could prove to be a remarkable one with the press conference of ECB. Rate decisions from central bank became the theme for the day, as Riksbank of Sweden raised the rates to 4.75 percent by 25 basis points in highly anticipated decision. But with a prediction of a fall in borrowing costs in upcoming weeks has put Sweden under a pressure of selling.

The European currency rose to $1.4510 as it pulled back from the previous day’s hit of $1.4384, a 0.1 percent of rise since January, where as the dollar was found moving up as it touched 108.50 yen.

With a 0.4 percent of increase in oil prices, the currency of US was weighed down as the dollar index .DXY skidded to 0.1 percent. The fall in oil prices is recovering from a fall of 9 percent so far in the current week.

Prior to any holding of rates by BoE at 5 percent, Sterling moved up to $1.7820 with a rise in 0.4 percent. But in order to support weak economy there is expected a cut in the works. On Wednesday, the anticipation of cut has pushed the currency of UK to a two and half year low.

Following an announcement from Riksbank, euro moved up to 9.4761 with a 0.2 percent rise.

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Reserve Bank of India generated surplus on weak rupee
Monday, September 22nd, 2008

Reserve Bank of India has cashed huge surplus on weak rupee. To stay steady in foreign exchange market, RBI sold a part of Forex reserves.

RBI has witnessed an increase in its growth by 45% for year 2007-2008 from foreign exchange market. The record growth is assisted with a record Rs 15,011 crore surpluses transferred to the government, whose accounting year finished in the June of 2008.

The total income of central bank rose 41 percent more, as it saw the growth of income from initial amount of 41,039.73 crore (the profit earned by the sale of SBI shares is excluded) to Rs 57,750 crore in the year 2007-2008. Central bank’s major source of income is foreign exchange operations, capital gains/losses on foreign currency securities, discounts gains/losses in Forex trading, and comprising interest.

With 90 percent of Reserve Bank of India’s income being generated from foreign exchange, the financial year of 2007 saw an increase in foreign sources as it went soaring from Rs 35,152.99 crore to Rs 51,883.27 crore.

Another area of profit used by central bank was the sale of dollar since the beginning of April, when dollar reached higher level of price from the level it was brought, which benefited the bank a lot. Reserve management strategy of the bank for the year included a prominent feature where it pulled out of deposits with reign commercial banks those hit by sub-prime emergency.

Since central bank has been lending to banks suffering tight cash situations on regular basis, it is expected of it to profit from hike in repo rate in the existing year. The cash situation of many banks has been stiffening up due to a hike in reserve requirements (CRR) by the central bank, which is a part or amount of deposits with the Reserve Bank of India. The funds or amount of money parked with central bank as CRR does not provides any interest rates to banks.