is4profit Weekly Currency Roundup (30th November 2012)
At the start of the week the Euro soared to a seven-month high against the Japanese Yen and benefited from increasing confidence that the Eurozone will make a recovery over the coming years. Against the US Dollar the single currency hit a three-week high but against the Pound it weakened slightly. The Euro then touched a three-week high after the regions finance ministers reached an agreement on Greece’s debt burden. The ministers agreed to release up to £40 billion of bailout funds to the indebted nation.
Mid-week the Euro has weakened against the majority of its safe-haven rivals despite the approval of a deal to provide Greece with additional bailout funds. Analysts warned that while the news was positive overall for the Euro-zone, disappointing economic indicators from throughout the region continued to weigh down on the common currency.
It ended the week making gains against its safe-haven rivals due to the release of a set of strong US economic data which boosted optimism and led to demand for riskier assets. As a result the single currency breached the significant 1.3000 level.
The US Dollar began the week suffering losses against most of its higher yielding currency rivals as positive news out of the Eurozone led to traders purchasing riskier assets. As a result the currency weakened against nearly all of its most traded peers.
The ‘Greenback’ was then weighed down by concerns that a deal cannot be made regarding the upcoming ‘fiscal cliff’. Fears are growing that the Republicans and Democrats will not be able to strike a deal that would avert the massive cuts to public spending and the hiking of taxes. If the ‘cliff’ is brought into force then we could see the US and global economy slide in the wrong direction.
During mid-week the US Dollar made gains against the majority of its peers after demand for safe haven assets increased due to concern over the Euro crisis. Against the Euro, ‘cable’ increased, moving upwards from its near one-month low posted yesterday. Investors are concerned that the Greek debt deal will stall and that US lawmakers will struggle to avert the dreaded ‘fiscal cliff’.
By Friday the USD had weakened against the majority of its peers after optimism that a deal will be made in regards to the ‘fiscal cliff’. Demand for the safe-haven currency weakened as traders and investors drew more confident that the situation will be resolved by the end of the year.
The Pound began strengthened against the United States Dollar over the weekend pushing the currency pair up above the important 1.60 mark for the first time in several weeks. The strengthening came as demand for riskier currencies increased after Greece indicated that the International Monetary Fund had relaxed its debt-cutting target for the country, raising hopes that the next round of much needed bailout funds would be granted.
Midweek the Pound strengthened against the US Dollar, and jumped upwards against the Canadian Dollar after the UK government appointed the Bank of Canada’s current governor Mark Carney to replace the outgoing Mervyn King. The choice took many economists by surprise but it appears the markets are pleased with the decision.
As a result of the announcement Sterling rose further above the important 1.60 mark against the US Dollar and a more than two-week high against the Canadian currency.
It was a mixed week for the Yen as it strengthened at the start of the week before slipping near the end. The safe haven currency at first benefited from the markets worries over Europe and the fiscal cliff.
By the end of the week Yen had weakened as demand for riskier assets improved expectations of a bolder anti-deflation policy from a post-election government continued to fuel sales of the Japanese currency.
The ‘Aussie’ started the week trading near to its strongest levels in two weeks due to the increased sense of optimism that Europe’s finance ministers would agree on a deal to unlock the next round of bailout funds for Greece. Against the New Zealand Dollar the Australian currency hit a two-week low as economists and investors forecast that the Reserve Bank of Australia will lower its borrowing costs at a meeting next month.
The ‘Aussie’ ended the week down against the majority of its peers as speculation mounted that the nation’s Central Bank is planning to lower interest rates next week in an attempt to protect the economy from the slowdown in the mining industry. Against the New Zealand Dollar it slumped to a three-week low.
New Zealand Dollar
Like the other riskier currencies the ‘Kiwi’ strengthened on the back of the sense of optimism that emerged from the Eurozone finance ministers meeting.
The ‘Kiwi’ then weakened after coming under pressure due to releasing wider-than-expected trade deficit figures for October. The EU finance minister’s decision to grant further aid to Greece gave the currency some support against the US Dollar.
The ‘Kiwi’ ended the week slightly down against most of its peers but hit a three-week high against its Australian counterpart. The New Zealand Reserve Bank is due to publish its own interest rate decision next Thursday along with the Bank’s expectations for the year ahead. A negative forecast will almost certainly weaken the currency.
The ‘Loonie’ began the week posting a two-week high against its American counterpart on Friday due to the riskier currency receiving a boost from Eurozone leaders coming close to a deal regarding Greece and by data showing an increase in German business morale. The currency then fell from its two-week high against the US Dollar due to Bank of Canada governor Mark Carney being named the new chief of the Bank of England. The currency was also weakened by a lack of demand for the currency as fears grew concerning the USA’s ‘fiscal cliff’. The price of the nation’s biggest export of crude oil also fell contributing to the weighing down of the currency.
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