is4profit Weekly Currency Roundup (4th January 2013)
Happy New Year to all is4profit’s currency roundup readers.
The Euro made gains against its major currency rivals due to investors taking more risk as the markets digested the news that the US ‘fiscal cliff’ had been avoided. Against the US currency the Euro rose to its highest level in eight months and strengthened against the British Pound.
The Euro then took moderate losses against the ‘Greenback’ and Japanese Yen due to the release of the latest EU manufacturing data which showed that the region was still deep in recession. The Euro fell against the Dollar as investor confidence gave way to concerns about future budgetary rows in Washington.
The currency continued to take losses against several of its currency rivals due to new fears that the US government will soon reach its ‘debt ceiling’ and create risk aversion in the markets.
The US Dollar weakened against the majority of its currency rivals as investors resorted to a bout of risk taking ahead of the announcement that the ‘fiscal cliff’ has been averted. The currency then weakened to its lowest level in a year against the British Pound and its lowest level since May against the Euro.
The Dollar then reversed some of the losses it suffered yesterday (Thursday) due to investors seeking a safe-haven as worries crept into the market over the USA’s debt ceiling. The currency made gains against most of its major peers. Investors believe that the US Treasury will exhaust its so called ‘extraordinary measures’ to fund the government by the end of February or early March. After the drama of the ‘fiscal cliff’ we can expect to see further crises out of the US over the coming months.
The ‘Greenback’ hit a two-and-a-half year high against the Japanese Yen and strengthened to a three-week high against the Euro. The strengthening comes after the markets continue to opt for safe haven currencies as they worry about future US budgetary negotiations. The release of the Federal Reserve minutes also contributed to the demand for the safe-haven Dollar after several policy makers appeared to be concerned over further monetary easing measures.
On Wednesday the Pound soared to its strongest level in 16-months against the US Dollar due to US lawmakers successfully passing legislation that will enable the world’s biggest economy from falling over the ‘fiscal cliff’. Sterling also saw gains against the Japanese Yen as economists predicted that a new data report will show that UK manufacturing stabilized in December.
Against the Euro the Pound weakened slightly due to the Euro strengthening thanks to the news out of the United States. An increased sense of optimism regarding the Eurozone in 2013 has seen the single currency firm.
After its strong gains against the US Dollar, Thursday was a different story. The Pound weakened due to investors being wary of issues regarding the US debt ceiling. They have now turned their attention to whether US policy makers can come to an agreement to raise the world’s largest economy’s debt limit. The Pound also suffered from traders selling the currency after it peaked above the $1.63 mark. Against the Euro, Sterling made small gains after the latest manufacturing figures showed that the Eurozone’s output fell. The UK meanwhile posted its strongest results in 15 months.
The Pound weakened for a second day against the US Dollar falling to a three-week low as investors awaited the outcome of the latest UK service sector data.
The Yen slumped to its lowest level in two years against the US Dollar as the new Japanese Prime Minister Shinz? Abe vowed to push on with his aggressive monetary easing measures and drive to devalue the Yen.
PM Shinz? Abe threatened to change a law guaranteeing the Bank of Japan’s independence if it did not agree to set a two-percent inflation target, in a bid to drag Japan out of deflation that has haunted its economy for years.
The ‘Aussie’ made gains after the successful conclusion to the US ‘fiscal cliff’ negotiations. The Republican controlled House of Representatives approved the deal that sees a rise to the tax rate of couples earning more than $450,000 and extending a number of tax cuts. The outcome boosted demand for riskier currencies such as the Euro and Australian Dollar. The currency shrugged off domestic data which showed that house prices were weaker in December and dampened expectations of a recovery in the nation’s property sector.
The ‘Aussie’ then retreated from a two-week high against the US Dollar due to investors seeking safe havens as concern grows that US lawmakers will struggle to agree on raising the nation’s debt ceiling. The Australian currency slid against most of its 16 most traded counterparts as a result.
It fell again against the US Dollar due to declines in Australia’s and China’s service-industry indexes. China, Australia’s biggest trade partner, posted a PMI decrease of 51.7 in December, down from the 52.1 in November. Australia also posted a decline with its services sector shrinking for an 11th straight month with a reading of 43.2 in December, down from 47.1 in November.
The ‘Kiwi’ followed its Australian relation upwards due to the ‘fiscal cliff’ negotiations coming to a positive conclusion. The New Zealand currency headed for an 18% increase against the Japanese Yen as investors expect Japan’s new government to begin to lean on the Bank of Japan and put pressure on it to weaken the Yen.
The currency continued to follow its Australian relative in trading down against the US Dollar as the market turns its attention to the next imminent crisis emerging out of the USA. The New Zealand currency’s losses were limited however; due to the increase in the price of whole-milk powder, one of the nation’s main exports.
The ‘Loonie’ gained against its US relation after traders took more risk due to the resolution of the ‘fiscal cliff’. The currency was also boosted by a rise in Canada’s largest export, crude oil, which saw its value increase by 1%.
It then weakened against the US Dollar but remained above parity. The decline comes after the euphoria of the successful fiscal cliff negotiations gave way to fears that the US will face even tougher budgetary battles in the months ahead.
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