is4profit Weekly Currency Roundup (23rd November 2012)
At the start of the week Demand for the Euro increased due to increasing speculation that Europe’s finance ministers were about to release a new round of bailout funds to Greece. The news increased risk demand causing the Euro to advance against several of its main currency rivals. The Euro has fallen against the US Dollar breaking a two-day gain after Europe’s finance ministers failed to agree on a debt reduction package for the Greeks despite having more than 11 hours of talks. The single currency suffered further losses after Luxembourg’s finance minister said that the discussions will resume on the 26th of November, causing traders and investors to seek shelter in safe havens as the EU dithers.
The Euro then strengthened to its highest level since November 2nd and hit a two-week high against the US Dollar after an industry report signalled that China’s manufacturing expanded in November, adding to evidence that the world’s second-largest economy is recovering at a quicker pace.
The ‘Greenback’ began the week bearish against many of its main currency rivals as increased hopes that a deal could be made to avoid the upcoming ‘fiscal cliff’ led to an increase in risk taking.
Cable then traded strongly against a basket of currencies as demand for safe haven currencies continued to strengthen. Fears over the global economy continue after the European Union failed to agree to the next round of desperately needed bailout funds for Greece. Against the Japanese Yen the Dollar shot up to a new seven-month high due to speculation that the current Japanese government will lose the upcoming election.
Midweek the ‘Greenback’ hit a fresh 7 ½ month high against the Japanese Yen due to speculation that the upcoming Japanese elections will weigh down the Japanese currency. Increased demand for riskier assets has seen ‘Cable’ weaken against the Pound and Euro
The Pound began the week strengthened for a second day against the Euro after Europe’s finance ministers failed to agree on a debt-reduction package for Greece. Against the Dollar the Pound dropped for the first time in five days after the Bank of England published its minutes for its November meeting and decided to put on hold a £375billion asset-purchase program aimed at boosting growth. So far this year Sterling has gained by 1.5% and is expected to make further gains against the Euro if the Greece situation and EU budget is not resolved.
At the start of the week the Yen suffered significant losses against the Euro as investor demand for riskier assets was bolstered by hopes that the EU would come up with a solution to the Greek debt crisis. This proved to not be the case and as a result the Yen recovered some ground. At midweek the Yen slumped to a 7 ½ month low against the US Dollar as investors increased their bets that the current Japanese government will lose the upcoming elections, increasing the likelihood of further monetary easing measures being implemented.
On Friday the Yen continued to make losses as the possibility of more quantitative easing increased for next month.
The ‘Aussie’ halted its three-day decline against the New Zealand Dollar despite the nation’s Reserve Bank saying in its November minutes that it is planning to make further reductions to the interest rate. The currency also received a boost after the International Monetary Fund classified the Australian Dollar as a reserve currency.
The ‘Aussie’ then weakened after the European Union failed over the terms for Greece. The currency was also weakened by a decline in Japanese imports which dimmed the outlook for Australian shipments.
At the end of the week the ‘Aussie’ was trading upwards after being buoyed by news of an improvement in the pace of manufacturing in China in November. The Chinese Manufacturing Purchasing Managers Index showed that activity rose to 50.4 in November compared with October’s reading of 49.5. The strength of the Chinese data also helped the ‘Aussie’ after economists lowered their prediction of a further cut in the nation’s interest rates.
New Zealand Dollar
The ‘Kiwi’ began up against a number of its peers due to the increase in demand for riskier assets. The European finance ministers meeting was expected to announce a new multi-billion Euro bailout for Greece and ease fears that the troubled nation could be forced out of the Eurozone. Bolstered by improving global sentiment amid hopes Washington will reach a compromise on the so-called "fiscal cliff" the New Zealand made further gains.
The ‘Kiwi’ then fell after European Union finance ministers failed to reach an agreement on the next round of bailout funds for Greece causing investors to be spooked and seek safe havens in the US Dollar and elsewhere.
On Friday the currency was relatively unchanged because of thin trading due to holidays in the US and Japan. The better-than-expected Chinese economic data saw the currency rise against the majority of its most traded peers. The markets are taking a wait-and-see approach for the outcome of Monday’s European leaders meeting on the situation for Greece and the EU budget.
The ‘Loonie’ hit a one-month high against the US Dollar at the start of the week after the International Monetary Fund decided to classify the North American currency as a reserve currency. Increasing commodity prices including a higher price for the nation’s biggest export of crude oil also bolstered the currency.
By the end of the week the ‘Loonie’ then weakened due to the outcome of the European finance ministers meeting and the decline in commodity prices. Following the big gains seen on Monday the value of crude oil and other commodities fell. The ongoing violence between Israel and Gaza could force the price of oil up and jeopardize shipments of oil from the Middle East. Copper was also down.
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