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.

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Rating Downgrades Drop Icelandic Krona

The Icelandic krona declined to the lowest level in almost seven years against the U.S. dollar yesterday after the rating downgrades by S&P and Fitch rating agencies raised the risk-averting mood among the investors.

The drop in this national currency reached more than 17 percent this week after the central bank pledged to nationalize the century-old Glitnir Bank as it failed to pay by its short-term debts. Investors believe that the central bank won’t be able to help all the banks and the country will face a strong financial crisis.

The USD/ISK is rising for the sixth day in a row now — the longest rally in more than 3 months. Traders lose confidence in the financial system, the Central Bank of Iceland and its ability to resist crisis. That plays against the krona’s value.

USD/ISK rose from 108.16 to 111.29 as of 13:12 GMT today. It reached 111.51 rate yesterday — the highest rate since November 2001 after closing at 94.35 at the last week’s trading session.

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Czech and Polish Central Banks Leave Rates Unchanged

After two other European central banks decided to hold their current interest rates, Czech and Polish banks chose to follow the same way and didn’t change their reference interest rates despite the fact that they both raised the rates at the end of November.

Today both central banks had their scheduled monetary policy meetings at the same time at 2 p.m. GMT. Czech National Bank left rate at 3.50%, National Bank of Poland – at 5.00%. Central banks of Sweden and Hungary held their interest rates earlier too. ECB left the rate unchanged after its last meeting on Devember 6.

The fact that four European central banks decided to follow ECB rate decision may mean only that European Union is facing a hard time both from the side of rising inflation and from the side of the slowing economic growth. Inflation matter is caused by the high oil prices that drive prices for other goods up; GDP output slowdown is attributed to the bank sector turmoil and the over-expensive euro (compared to dollar and yuan).

It is very probable now for the other European central banks (Norwegian, Danish, Slovakian, Latvian) to leave their rates unchanged. They will wait for the balance of growth/inflation to move into any direction before taking some preventive actions or continuing general monetary policy.

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Yuan Falls as China Doesn’t Want Appreciation

The Chinese yuan declined at a fastest pace during the last two months as the country’s central bank lowered the reference exchange rate to stimulate the exporting industry.

The China’s yuan lost about 0.1 percent during one day today after the People’s Bank of China fixed the reference exchange rate of the yuan to the U.S. dollar at 6.8285 — down by 0.07 percent compared to the previous rate. China uses the regulated foreign exchange rate to keep the yuan from appreciating too fast and thus helps the domestic companies compete globally.

U.S. Treasury Secretary Timothy Geithner will start his visit to China on June 1. The aim of the visit is to discuss trading relations and Geithner will probably insist on the fast yuan’s appreciation. The previous visit of the Treasury Secretary (Henry Paulson at that time) was in early December 2008.

Analysts say that the latest downward reference rate change means that the monetary authorities in China don’t plan to float the yuan’s exchange rate and won’t allow its appreciation. The economic growth is still a priority for China after the slowest gain of GDP in almost ten years in the first quarter.

USD/CNY advanced from 6.8235 to 6.8307 as of 7:40 GMT today. The highest intraday rate was set near 6.8309.

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New Zealand Dollar – Victim of Carry Trade

While the Japanese yen is surely a benefiting currency when it comes to the carry trade panic, some currencies feel extremely bearish at the times of global financial instability and other factors that bring down risk appetites. New Zealand dollar is one such currency.

Carry trade is a global trend in the high-yielding investment industry, where traders buy high-risk currencies such as South African rand and New Zealand dollar, that has a very high interest rate, with a cheaper currency such as Japanese yen, which costs just 0.5% a year to borrow.

Popularity of the carry trading contributed a lot to the past years of the NZD growth. Traders could earn not only from the huge interest rates difference between New Zealand and Japanese Central Banks, but also from the growing appreciation of the high-yielding currencies. Carry trade has been growing into a enormous bubble for almost 4 years. And it looks like the time for its bursting has come.

The financial crisis based on the subprime lending crash triggered massive buying of the Japanese yen, as the investment safe haven. Strong demand for yen started to outweigh its offer from the carry trade speculators and it started to grow against riskier currencies. Rising yen began to trigger stop-loss orders of the carry traders, accelerating the yen growth. So, combination of global financial instability and the carry trade stop-losses caused a real rally for the low-yielding currencies.

Too bad for the high-yielders, such as the New Zealand dollar, there is a very high probability of their depreciation, which if left unstopped can inflict damage to many world economies.

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Brazilian Real Rebounds from August Lowest Rates

The Brazilian currency touched the weakest level in August today on global economic concerns but rebounded after stocks and commodities climbed worldwide, spurring demand for emergent markets assets.

After several days of bearish market on Chinese limitations towards steel and cement production, today equities markets worldwide rebounded, causing a domino effect that provide support for commodities to climb, influencing emergent market currencies like the Brazilian real up, which rebounded after touching the lowest rate in August today.

USD/BRL traded at 1.8620 as of 22:31 GMT after hitting 1.8885 hours earlier

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Australian Dollar Hits Two-Week High on Stocks

The Australian currency, often referred as the Aussie, strengthened to a two-week high versus the yen as stocks in Asia climbed this Monday, raising attractiveness for the yield of the Australian dollar.

The Australian dollar had a brilliant performance last week supported by U.S. corporate earnings, and this week, both the Aussie and its New Zealand counterpart started bullish mainly against the yen and the greenback, as commodity prices continued on the rise, favoring the attractiveness of the South Pacific currencies. The return of risk appetite among investors made Australia’s S&P/ASX 200 Index to advance for the fifth day in a row, and since commodity exports account for more than half of Australian foreign trade, the crude oil rise together with several other commodities pushed the Aussie up to hit a two-week high versus the Japanese yen, which is losing massively since risk aversion declined.

The fact that corporate earnings and several reports in the United States came better than what most of economists predicted pushed confidence among traders to return to high-yielding assets intensively. The Australian dollar lost significantly versus the yen two weeks ago, and the current market scenario is the perfect opportunity for traders to profit as the Aussie rebounds.

AUD/JPY climbed to 76.89 as of 11:34 GMT from an opening price of 75.75. AUD/USD followed, being traded at 0.8124 from 0.8055.

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Australian Dollar Climbs on Employment Data

The Australian dollar is being traded today near a 10-month high as job figures in the country came unexpectedly positive, adding confidence that the South Pacific region will be one of the first global economic areas to find its way out of recession.

The forecasts regarding the Australian job market pointed to a consistent decline in the number of employed people, which were proved to be false, as today, a national employment report indicated a rise in jobs, making the Australian dollar to climb for the fifth day in a week versus its U.S. counterpart. The Australian dollar is being one of the best performing currencies among the 16 most traded, as speculations indicate that the country is likely to be one of the first to increase its benchmark interest rate, a fact that is attracting a significant amount of traders to purchase assets in the South Pacific region.

The unexpectedly favorable employment data in Australia helped the Aussie to keep its levels very high, as weakened figures would push the Aussie down favoring a corrective movement after several days of gains. The Australian currency is likely to continue its uptrend, as risk appetite stills very broad among traders, favoring the main South Pacific currencies.

AUD/JPY traded at 80.389 as of 10:45 GMT from a previous rate of 79.625 yesterday. EUR/AUD fell from 1.7175 to 1.7089.

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Australian Dollar Down on Chinese Negative Data

The Australian Dollar lost today against several currencies like the yen and the U.S. dollar after a negative report in China pushed investors back to safer assets, damping demand for the Aussie’s riskier profile.

The Australian currency lost the most in a week today after Chinese banking data came worse-than-expected by economists, showing a slide in new lending figures and a disappointing rise for fixed-assets investments, indicating that one of the main global economies may still face further months of recession. The New Zealand dollar as well as its Australian counterpart are considered high-yielding currencies despite the current low interest rates in both countries, and these negative reports in China affected the Aussie and the kiwi today, paring much of last week’s gains versus the yen and the greenback.

Economists affirm that last week’s euphoria stimulated forecasts to be set higher, and the Chinese numbers today frustrated most of traders, which were attracted to refuge currencies like the U.S. dollar and the Japanese yen to provide more safety to their portfolios. The currency market tends to remain very volatile until the global economic conditions remain uncertain, and it is hard to predict what direction high-yielding currencies will take towards the end of the year.

AUD/JPY fell to 80.73 as of 10:54 GMT from a previous rate of 81.70 in the intraday comparison. AUD/USD followed the same trend from 0.8417 to a current price of 0.8363.

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Pound Declines on U.K. Economic Figures

The pound posted another day of losses versus most of the 16 main traded currencies as the economic situation in Great Britain remains behind most of the other main global economies, decreasing attractiveness for the British currency.

Today’s published data and tomorrow’s forecasts are once again impacting the pound which is posting the sixth consecutive day of losses versus the euro, since U.K.’s economic outlook is currently far more negative than the Eurozone’s perspectives. Today, the German Ifo business climate came positive beyond expectations, helping the euro to climb to the highest level in almost 3 months versus the British currency, and this trend is likely to follow as tomorrow, a U.K. house prices report is expected to bring rather disappointing numbers, which would weigh on the pound even further.

Currency specialists forecast a rather complicated short-term future for the U.K. currency as other economic regions throughout the world, like the South Pacific and North America, are providing more consistent signs of recovery than the pound country, which is certainly decreasing attractiveness for the British currency, causing a mass capital outflow from pound-priced assets towards more attractive bets throughout the financial world. The pound is likely to remain bearish, until more optimistic reports start to appear in the United Kingdom.

EUR/GBP climbed to 0.8783 as of 11:02 GMT from yesterday’s rate of 0.8728. GBP/USD traded at 1.6279 from 1.6390.

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Pound Declines on Disappointing Manufacturing Numbers

The pound declined today versus the most of 16 main traded currencies after a report in the country indicated that manufacturing production declined beyond economists expectations, adding pessimism concerning the recession length in the United Kingdom.

The United Kingdom has indicated through its latest economics reports that the current recession in the country can be considered more serious if compared to most of the main relevant economic regions around the world, declining appeal for the pound’s outlook, which traded today in the lowest level versus the euro in two months. Today, a manufacturing report published in Britain came below 50, indicating a contraction and going against expectations, sice most of economists were expecting a positive performance fueled by the to-be-confirmed economic revival in Europe. Following the pound’s decline, stocks in Britain also declined, indicating a flow of capital out of the British Isles.

Analysts evaluate the current fundamentals in the United Kingdom as negative factors weighing on the pound’s performance, since Bank of England’s policies are being unable to revive the nation’s economy, raising concerns that the recession will be longer and deeper in the U.K. than previous forecasts, which is certainly decreasing attractiveness for the British currency.

GBP/USD traded at 1.6214 as of 12:58 GMT from a previous rate of 1.6313 in the beginning of the day. EUR/GBP is in its highest rate in more than two months being traded at 0.8825.

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German Business Sentiment Fuels Euro Rally

After a rather mediocre start in the beginning of this week the euro had a positive performance today as German business sentiment rose again suggesting that the Eurozone member countries are finding its path out of recession.

The German Ifo business climate index climbed beyond economists expectations this morning as confidence is rising towards the country’s economy, fact which brought the euro to the highest level in almost 3 months versus the United Kingdom’s currency, nation which is posting less expressive signs of revival if compared to the wealthiest nation among the Eurozone members, Germany. Renewed optimism today also formed bullish patterns in commodity charts, favoring currencies like the Norwegian krone, since the Nordic nation is one of the main providers of oil for the European Union.

Analysts stress on the fact that German economic numbers are the main drivers of euro appreciation versus the pound, since Germany is by far the strongest economy in the bloc, followed by France. As signs of recovery become more evident, volatility among the euro and other main currencies tend to decrease, but the United Kingdom is still dealing with a deeper recession, fact which provide support for the euro to gain even further versus the faltering British currency.

EUR/GBP traded at 0.8775 as of 9:40 GMT from an intraday rate of 0.8727.

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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.

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New Zealand Dollar Falls on Central Bank Governor Interview

The New Zealand dollar started this week losing versus the greenback and the yen as higher-yielding currencies attractiveness declined while risk aversion grew among traders globally, shunning investors from assets in the South Pacific region.

After a radio interview in which Allan Bollard, Reserve Bank of New Zealand Governor, stated that a strong kiwi is affecting the nation’s exports performance, the New Zealand currency declined versus most of the 16 main traded currencies, also influenced by a negative performance in Asian stock markets, mainly in China, where the Shanghai Composite Index declined more than 6 percent, decreasing attractiveness for the relatively riskier trading options in New Zealand and Australia.

A decline in the kiwi rates will be extremely favorable for New Zealand’s economic recovery, according to specialists. The bullish patterns perceived in the last two months for the New Zealand currency may delay the recovery in the South Pacific nation, as a strong currency declines competitiveness for a country’s products, but as long as volatility remains high, with multiple reports proving support for contradictory speculations, it will be difficult to determine how well the kiwi will perform, as well as the New Zealand economy as a whole, considering its export-oriented profile.

NZD/JPY traded at 63.45 as of 10:54 GMT from an opening rate of 63.74 yesterday. NZD/USD followed the same trend, being traded at 0.6839 from 0.6815.

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Pound Declines on Disappointing Manufacturing Numbers

The pound declined today versus the most of 16 main traded currencies after a report in the country indicated that manufacturing production declined beyond economists expectations, adding pessimism concerning the recession length in the United Kingdom.

The United Kingdom has indicated through its latest economics reports that the current recession in the country can be considered more serious if compared to most of the main relevant economic regions around the world, declining appeal for the pound’s outlook, which traded today in the lowest level versus the euro in two months. Today, a manufacturing report published in Britain came below 50, indicating a contraction and going against expectations, sice most of economists were expecting a positive performance fueled by the to-be-confirmed economic revival in Europe. Following the pound’s decline, stocks in Britain also declined, indicating a flow of capital out of the British Isles.

Analysts evaluate the current fundamentals in the United Kingdom as negative factors weighing on the pound’s performance, since Bank of England’s policies are being unable to revive the nation’s economy, raising concerns that the recession will be longer and deeper in the U.K. than previous forecasts, which is certainly decreasing attractiveness for the British currency.

GBP/USD traded at 1.6214 as of 12:58 GMT from a previous rate of 1.6313 in the beginning of the day. EUR/GBP is in its highest rate in more than two months being traded at 0.8825

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Negative Week for Canada’s Currency as Risk Aversion Rises

The Canadian currency entered its third day of consecutive losses as a new intense wave of risk aversion is creating bearish patterns in the main two loonie’s vectors, the crude oil and stocks.

After touching the highest rate in more than 10 months in June, the Canadian currency did not manage to sustain its high levels as towards the end of August and now in the beginning of September stocks declined and demand for commodities faltered, influencing negatively the performance of the Canadian dollar.

USD/CAD traded at 1.1046 as of 18:28 from a previous rate of 1.0938 in the intraday comparison.

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U.S dollar: Looking For The Line of Least Resistance

As housing continues to improve, unemployment could rise again in the coming months. In Germany, confidence is growing, while the economy might take advantage of global growth.

U.S.: housing is back?

Unemployment remains the biggest challenge for the U.S. economy, despite losses declining to 220,000 from 247,000 in July. In reality, we are experiencing the lowest job contraction in more than a year, but the unemployment rate could again rise due to the slow recovery in the last part of 2009. At the contrary, the real estate market is confirming the good trend and it is expected to positively contribute to the Gross Domestic Product (GDP) numbers, along with inventory growth for various goods. In July, new home sales moved up 9.6% year-on-year to 433,000 units from June’s 395,000. It has been the fourth consecutive monthly increase and the largest gain since February of 2005. With three regions out of four posting good results, inventories are now 7.5 months supply from 8.5 months in June, far away from the peak of 12.4 months reached in January.

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