is4profit Weekly Currency Roundup (21st September 2012)
It’s been another interesting week for world currencies as bank minutes, business forecasts and financial announcements affected the currency values in the worldwide monetary markets…
The Pound began the week down against the Euro, falling to a fresh three-month low as the single currency continued to strengthen on the back of market optimism.
As the markets once again grew nervous over the state of the Eurozone, the Pound made gains against the Euro. Squabbling amongst the regions leadership has continued to raise doubts that the bold European Central Bank plan announced the other week will not prove effective as long as the politicians cannot agree on how to proceed.
The Bank of England’s minutes for September showed that all nine policymakers voted to maintain the current interest rate and the amount of quantitative easing. The outcome was expected by the markets and had little impact on the currency.
In mid-week the Pound rose to a one-week high against a weaker Euro as poor Eurozone business activity data increased concerns amongst the markets that the single currency region may be slipping deeper into recession. In comparison the UK economy seems to be on the road to recovery for the third quarter.
The Euro began the week high against most of its major peers, but traders warned that squabbling amongst the Euro zone’s leaders could seriously undermine the single currency’s revival.
The Euro then retreated from its previous high levels and weakened against most of its major peers. The fall came ahead of the release of a German report that is forecast to show that investor confidence in the region fell to its lowest level for this year.
Mid-week the Euro made gains against the US Dollar and British Pound due to the Bank of Japan’s decision to implement a new round of Quantitative Easing. The move weakened the Yen but also boosted risk sentiment causing the Euro to reverse some of its losses.
After Markit released its latest flash PMI for the Eurozone, the Euro went back on the retreat. The Euro ended the week down at its lowest level for two months against the US Dollar as a series of disappointing data releases showed that the Euro region’s manufacturing and service industries shrank to a three-year low.
The US Dollar began the week down against its peers but in the space of the week it had reversed that trend.
The ‘Greenback’ made gains against the Euro and held steady against the British Pound as demand for the safe-haven currency improved. The markets grew increasingly nervous over the territorial dispute between China and Japan as well as the fall in confidence over the situation in the Eurozone.
The Dollar continued to strengthen against a basket of its peers due to increasing demand for safe-haven currencies. The situation in Europe and worries of a slowdown in China spooked the markets causing traders to seek a safer option. Confidence that European leaders will be able to come to a decisive agreement over the next steps in ending the Euro-crisis has waned.
The Yen was dominated by the actions of the Bank of Japan this week.
The Bank announced a new round of monetary easing which took the markets by surprise. The Yen initially fell to a one-month low against the US Dollar before recovering by the end of the week.
A sharp decrease in the currency’s value has been ruled out by most traders. This morning the Yen rose against its peers.
The ‘Aussie’ began the week trading half a US cent lower as worries about Chinese economic growth and rising tensions between Japan’s and Australia’s biggest trading partner drag on the currency. The Reserve Bank of Australia also released the minutes of its September board meeting. The Bank chose to leave the cash rate at 3.5% for a third month in a row.
In mid-week the Australian Dollar fell to its lowest level for a month after a report on the state of Chinese manufacturing showed that output could contract for the 11th month in a row. Australia relies on the export of raw materials to China and as a result the currency weakened against all of its 16 counterparts.
On Friday he ‘Aussie’ rose against most of its peers on prospects that the US Federal Reserve will support growth and optimism in the Asian markets that Europe is close to reaching a resolution of the debt crisis. Demand for higher yielding assets increased as a result.
New Zealand Dollar
On Monday profit taking caused the ‘Kiwi’ to slip against a number of its peers despite the latest survey of consumer confidence in the country has showed a rise. The NZ Dollar then went on to hit a five-month high against its Australian relation after the release of this month’s Reserve Bank of Australia policy meeting showed that the Bank is wary over the strength of the Aussie Dollar.
By Friday the ‘Kiwi’ followed the Australian Dollar upwards against a basket of currencies due to increased investor appetite for higher-yielding riskier assets. According to traders the New Zealand Dollar may reach as high as 84.70 US cents in the coming weeks if investors stay upbeat about the future of the global economy.
The Canadian Dollar began the week at a 12-month high against its American relative as the currency surged by more than two cents due to the European Central Banks announced bond buying plan.
It then tumbled against the US Dollar due to oil prices falling by their highest amount in three months. Confidence in the US economy also dragged on the Canadian currency with US manufacturing contracting more than forecast. Crude-oil, Canada’s biggest export, dropped more than $3 in less than a minute as October contracts were close to expiring.
The weakness of the currency comes after the price of crude oil fell for a third day in a row. The Canadian Dollar fell to an eight week low against the US Dollar on Friday as data releases from the US, Europe and China all dragged the currency downwards and traders flocked to the "safe-haven" United States Dollar for sanctuary.
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