is4profit Weekly Currency Roundup (12th October 2012)
The Euro began the week repeating the pattern we’ve seen for weeks with the markets losing patience with the Eurozone’s leadership. The Euro finance ministers’ meeting in Luxembourg did not yield any clear indicators as to how they will end the debt crisis.
Uncertainty over whether Spain will request a sovereign bailout caused the Euro to fall from last week’s two-week high. Investor hopes that the situation would be resolved faded as Spain’s government continued to insist that the country does not need a bailout. Continued uncertainty over Greece once more came to the forefront of the market’s minds and with no end in sight the situation continues to drag on in the single currency. The Euro then fell against 13 of its 16 most traded peers as fears over Greece and Spain continued to damage confidence.
The Euro weakened further against a number of its major peers after Standard & Poor cut Spain’s credit rating by two levels. It was slashed from BBB+ to BBB- (One level above "junk" status) and now has a negative outlook for its long-term performance. However, by Friday strong rhetoric from Eurozone leaders and praise from international finance chiefs for the region’s efforts to combat the debt crisis saw confidence return to the Euro.
The ‘Greenback’ started the week making gains against the Pound and Euro as the demand for the safe haven currency grew. The Dollar continued to make gains against the Euro and a basket of currencies after being bolstered by demand for safe haven currencies after the markets grew increasingly worried about the health of the global economy. The International Monetary Fund (IMF) downgraded the economic projections for a number of key nations creating fear. The bleak outlook dampened appetite for riskier assets sending investors in search of safe havens. The Dollar also made gains against the British Pound, briefly pushing the pair below the all important 1.60 level.
In midweek the Dollar hit a one-month high against the Euro due to demand for safe havens being boosted by Standard & Poor’s decision to slash Spain’s debt rating. On Friday the Dollar weakened against 13 of its 16 most traded peers as increased confidence that the US economy is recovering raised demand for riskier currencies, causing the safe haven Dollar to weaken.
The Pound started the week down against the US Dollar as a fairly empty UK economic calendar for October left the currency at the mercy of international trends. The Eurozone crisis continued to drag down on the Pound as risk aversion once again sees the markets seeking shelter in safe havens like the Japanese Yen and US Dollar. The Pound fell to a one-month low against the Dollar briefly sliding below the all important 1.60 mark.
As the week progressed the Pound made a series of gains against the Euro aided by Standard & Poor cutting Spain’s sovereign debt-rating, as a result Sterling strengthened by 0.1% against the single currency. On Friday Sterling rose 0.2% against the Dollar to 1.6029, edging further away from a one-month low of 1.5975 hit on Tuesday. With no UK data releases due until next week the Pound will be at the mercy of events in the Eurozone and the broader global economy.
Like its US safe haven counterpart the Yen made gains against a number of currencies. Ongoing worries over Europe and the IMF’s downgrading of a number of key economies saw investors flock to the currency.
Against the Dollar itself the Yen lost out and saw minor losses as the week progressed. The USD was supported against the Yen after Japanese finance Minister Koriki Jojima expressed at the G7 meeting in Tokyo concerns about the high levels of the currency. The Yen’s high level is thought to be damaging exports.
It’s been a week of ups for the ‘Aussie’ as it began the week down against most of its peers following the encouraging jobs data out of the United States and the expectation that the Australian Reserve Bank will have to make further interest rate cuts. The AUD then rallied from a three-month low after Europe’s finance ministers launched the Eurozone permanent aid fund. Gains in commodity prices also gave the currency a much needed boost.
A strong increase in the number of fulltime jobs created in the Australian economy aided the currency, showing a monthly gain of 32,100 fulltime jobs.
The ‘Aussie’ then rose to its highest level for a week due to a rise in commodity prices and increased demand for riskier currencies. The price of iron ore, Australia’s biggest export, rose to a two-month high.
New Zealand Dollar
The ‘Kiwi’ had a mixed week. It began the week trading down against a basket of currencies due to the weak demand for riskier commodity based currencies.
The NZD then strengthened against the US Dollar amid hopes that the Chinese government is planning to boost its stimulus policies to stop the slowdown in the country. Against the Euro the ‘Kiwi’ rose after the markets were not convinced that an agreement had been reached over the next batch of bailout funds for Greece.
The currency ended the week up against the US Dollar after the United States posted its latest trade deficit figures. There is no significant New Zealand data set for release until next Tuesday when the consumer price index by Statistics New Zealand and Australia’s full monetary policy statement are set for release.
Despite all of the positivity out of North America the ‘Loonie’ began the week down against a host of currencies on the back of risk aversion over Europe.
It made gains by moving upwards against the Euro advancing to a multi-day high of 1.2656. The currency then slumped to a four-day low against the US Dollar as concerns over the health of the global economy weighed on the Canadian currency. If oil prices lessen due to the global uncertainty then we can expect to see the currency weaken further.
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