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AC-Markets.com: Foreign Exchange Market (FOREX) daily and analyst comment
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Forex - Dollar rallied on Wednesday supported by drop in Oil prices and improved confidence in financial sector
The Dollar rallied to a one-month peak against the Yen and a two-week high against the Euro on Wednesday, supported by a further drop in Oil prices and improved confidence in the US financial sector.
The Dollar also continued to benefit from comments from Philadelphia Federal Reserve President Charles Plosser, who said on Tuesday that the US central bank may have to raise interest rates sooner rather than later to combat inflation. Futures markets are pricing a 68% chance against 52% the week before for the Fed to increase benchmark lending rates in September, to 2.25% from current 2%.
The Reserve Bank of New Zealand cut the benchmark interest rate by 25bp to 8% and said it expects to cut rates further on expectations the economy will continue to slow.
Forex - Forex market believe the worst of the problems in the US financial system are not yet over
The Dollar fell near a record low against the Euro as investors believe the worst of the problems in the US financial system are not yet over. While the Dollar has recovered somewhat after better results than expected from big financial institutions such as Citigroup, JPMorgan Chase and Bank of America, investors are awaiting more earnings reports this week.
With the economy suffering as the credit crisis hits the housing market and banks, expectations for the Federal Reserve to raise interest rates before the end of the year to curb inflation pressures are fading quickly, hurting the dollar.
The market's focus remains on a rescue plan for troubled US mortgage finance giants Fannie Mae and Freddie Mac. On Monday, US Treasury Secretary Henry Paulson said in an interview with CNBC that confidence in US capital markets and the US economy was the most important thing to support a strong Dollar.
The Euro may gain against the Yen as Japanese Investors ship more funds into higher-yielding
Forex - Dollar ended last week higher after smaller-than-expected loss from Citigroup
The Dollar rose on Friday, heading for its largest weekly gain versus the Euro in a month, after a smaller-than-expected quarterly loss from Citigroup eased worries about the US financial sector.
The Euro was capped by European Central Bank President Jean-Claude Trichet's comments published on Friday that euro-zone growth is likely to be weak in the second and third quarters before staging a recovery.
Sterling edged down from last week highs on speculation the UK government would increase borrowing.
Forex - Oil prices plunge $5. Financial market turmoil has weighed on Dollar.
The Dollar surged against the Yen on Thursday and erased earlier losses versus the Euro as Oil prices plunged and investors worried that high energy costs and financial market turmoil were slowing global growth.
US stocks also rallied as Oil fell for a third straight day. That helped the Dollar post its biggest daily gain against the yen in more than three months.
Better-than-expected Q2 results from JPMorgan Chase & Co helped eased concern about the stability of the US financial sector that has weighed on the Dollar.
Oil has gained 35% this year alone, at one point hitting a record high 147.27. It fell more than $5 on Thursday to 129.29, its lowest level in six weeks.
Analysts said the Dollar's gains remained tentative, particularly given the state of uncertainty surrounding US financial markets and the slumping housing market.
Forex - FX market Dollar fears receded after Oil slide and Wells Fargo results
Investor attention remains focused on the turmoil around Fannie and Freddie and fears about more credit losses at regional banks drove the Dollar sharply lower a day ago, with the Euro hitting a record high at 1.6037. But concerns about the US financial sector receded a bit on Wednesday after Wells Fargo, the fifth-largest US bank, raised its dividend despite a 23% decline in profit caused by bad loans.
Federal Reserve Chairman Ben Bernanke reiterated to a House of Representatives panel on Wednesday that the risks to US growth have increased along with upside inflation risks, mirroring remarks he made a day earlier before the Senate.
Analysts said FX investors were increasingly certain of at least one Fed rate hike before the year is out. US short-term interest rate futures are pricing in a 76% chance that the Fed raises interest rates from their current 2% by December.
Forex - Dollar stays weak near record lows on concerns about health of financial and housing sectors.
The Dollar rose from a near record low against the Euro on Monday after the United States announced an emergency plan to restore confidence in mortgage finance companies Fannie Mae and Freddie Mac. The plan helped calm market concerns about the health of the US financial and housing sectors, since the two companies fund half of all US mortgages.
Billionaire investor George Soros told Reuters on Monday that government debt accumulation coupled with a U.S. recession leaves the Dollar vulnerable. Analysts said the Dollar's recovery would depend on whether the U.S. initiatives were enough to calm investors' concerns about the financial health of Fannie Mae and Freddie Mac.
Investors will also be watching to see how the latest developments affect Fed Chairman Ben Bernanke's views on monetary policy and the economic outlook when he testifies before the Senate Banking Committee on Tuesday. Money markets have scaled back their expectations for monetary policy tightening from the Fed and now
Forex - US financial sector worries. Bank of England left rates unchanged
The Dollar fell against the Euro on Thursday, dragged down by persistent worries over the health of US financial sector, as shares and bonds of the
country's two mortgage finance giants tumbled on capitalization fears. The yield spread premium for the larger Fannie Mae rose to its highest since before the Fed's bailout of US Investment bank Bear Stearns in March.
Investors were slightly reassured by comments by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson in testimony to Congress that they were doing everything possible to restore calm to financial markets.
Bank of England held interest rates steady at 5% on Thursday, but analysts say rates will have to fall, making the GBP less attractive.
Forex - Middle-east tensions undermine US Dollar. BoE rate decision due today.
Dollar fall Wednesdays following a rise in oil prices and continued concerns over the financial health of banks and mortgage lenders. Wall Street fell over 2% as rumours abound that investment banks still have large write-downs to declare. Merrill Lynch fell over 9% after Fitch Ratings indicated that it may cut the banks debt rating.
An apparent attack on the US consulate in Istanbul also added to negative global sentiment toward the Dollar.
Oil was trading at $136.50 barrel after rising above $138 after a sharp fall in US stocks and growing middle-east tensions. Gold was up 0.89% to 928.40, amid geopolitical tensions thus increasing the metals attractiveness as a safe-haven instrument.
The BoE will decide interest rate policy later today with little chance of a shift in rates. Recent indicators show the UK heading towards a possible recession.
Forex - Dollar rose on Bernanke comments and Crude Oil drop
The Dollar rose on Tuesday as Bernanke said the Fed was considering extending the duration of the central bank's facilities for primary dealers into 2009 calming fresh credit concerns and encouraged investors to snap up US stocks.
Markets expectations of tighter US monetary policy by year-end were boosted by Federal Reserve Bank of Richmond President Jeffrey Lacker's comments that withdrawing some of the stimulus as risks to the economy diminished made eminent sense. Interest rate futures have fully priced in a 25bp hike in the fed funds rate by year-end. The benchmark overnight lending rate is currently at 2% after it was slashed by 325bp since September.
Forex - Dollar is mixed against US stocks recovery and renewed credit worries.
Lehman Brother cautioned on Monday that accounting changes could force Fannie Mae and Freddie Mac to raise capital at a difficult time. Both
Shares plunged, dragging US financial shares and the broader stock market down.
The Dollar got some support from comments by San Francisco Federal Reserve Bank President Janet Yellen that inflation was starting to outweigh the risk of a deteriorating US economy. Yellen's remarks indicated that the Fed could be leaning toward raising interest rates.
Such a step would help narrow the interest rate differential between the Dollar and the Euro, in the wake of the European Central Bank's 25bp rate hike to 4.25% last Thursday.
Forex - Dollar edged up ahead of G8 comments and last week Oil record high
The Dollar edged up to a one-week high versus a basket of major currencies on Monday, on speculation that comments from G8 officials could push Oil prices further away from last week's record highs.
The Greenback also continued to benefit from a neutral European Central Bank tone, which reduced expectations of further rate hikes after last Thursday's move to 4.25%.
Oil hit 145.85 high on Thursday ahead of G8 meeting in Japan. Crude prices show a close negative correlation with the Dollar because the United States is a heavy energy.
Investors have started to take the view that risks to growth and concern about the financial sector will prevent the Fed from raising the fed funds rate from 2% for now.
Forex - Dollar dropped after ADP report ahead of early US jobs release
The Dollar dropped against the Euro on Wednesday after a report showed the US private sector shed more jobs than expected in June. The ADP Employer Services data, which showed the largest drop since November 2002, is often seen as a precursor to the government's monthly report on the labor market (early release on Thursday). Poll of Economists expect another drop in non-farm payrolls last month.
Forex investors bought the Euro ahead of an expected interest rate hike by the European Central Bank on Thursday. The ECB is widely expected to lift its key lending rate by 25bp to 4.25%, and President Jean-Claude Trichet's news conference after the meeting may indicate further increases.
Sterling fell broadly as tumbling UK housing shares and a profit warning from retailer Marks and Spencer cast a shadow over the slowing British economy.
Dollar fell against a broadly stronger Australian Dollar, which jumped after Australian retail sales soundly beat expectations for May.
Forex - Dollar fell in volatile market ahead of ECB rate outlook
The Dollar fell against the Euro and was little changed against the Yen on Tuesday in a volatile session as investors debated the outlook for the US economy while anticipating a rate hike from the European Central Bank later this week.
US stocks retraced earlier losses after General Motors reported stronger-than-expected June sales, keeping the Dollar off session lows.
The Institute for Supply Management said its index of national factory activity rose in June to 50.2 from 49.6 in May after four straight months of contraction.
Euro-zone manufacturing activity contracted for the first time in 3-year in June and output prices matched April's year high. But analysts said Tuesday's data will not prevent the ECB raising rates.
Forex - Dollar fell to 3-week low as Oil surged to record high and US stock dropped.
The Dollar fell to three-week lows against the Euro on Friday, dented after Oil prices surged to a record high, data showed US consumer sentiment hit a 28-year low and Wall Street stocks extended their slide.
The Dollar would stay under pressure after US financial shares fell on Friday on worries about more credit losses. Lehman Brothers forecast Merrill Lynch would write down another $5.4bio in the 2nd quarter, while Moody's said it may cut Morgan Stanley's credit rating.
The European Central Bank holds a policy meeting on Thursday and is widely expected to raise rates to 4.25% fight rising prices. The key US jobs data is also due on Thursday.
Forex - Dollar near lows economic and credit worries
The Dollar slumped on Thursday, hitting its lowest level against the Euro in nearly three weeks, as investors reduced their expectations for a Federal Reserve interest rate rise this year.
While the Federal Reserve on Wednesday said inflation risks had increased, it did not use language that convinced markets a rate rise was likely at its next policy meeting in August. In contrast, the ECB has repeatedly said it may lift interest rates in July to fight inflation. That helped push the Euro near a three-week high at 1.5768. The US central bank's move to leave interest rates unchanged on Wednesday effectively ended one of its most aggressive rate-cutting campaigns, launched last September to curb economic fallout from the housing and credit crisis.
US financial stocks plummeted while shares of General Motors sank more than 10%. Fitch Ratings' downgrade of General Motors and Chrysler credit ratings also hit the Dollar, as did the Dow's drop to its lowest level in 21 months. Oil prices on
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