is4profit Weekly Currency Report (1st February 2013)
World currency market news for Friday the 1st of February 2013
The Euro continued to make gains against its major rivals this week as the single currency received a boost from better-than-expected economic data and rising confidence in the region.
On Monday the Business Climate figures out of Germany helped the Euro rise against the Japanese Yen, to its highest level since April 2011.
The Euro continued to strengthen against the majority of its peers due to continuing high confidence emerging from the single currency region. As a result, demand for riskier assets continued to rise. The Euro has hit its longest winning streak in nearly a decade.
The US Dollar weakened against the majority of its counterparts this week.
It fell against most of its peers due to worse-than-expected advanced GDP figures denting confidence in the US economic recovery.
Against the Euro, the Dollar fell to a six-month low as investors waited to see the release of the latest US jobless claims figures. The Dollar then reversed its losses, making temporary gains against most of its higher-yielding currency rivals due to the release of worse-than-expected economic data from the Eurozone.
The negative figures saw investors look to the Dollar for a safe haven. This gain however was short-lived as better-than-expected PMI data from Europe ensured the Euro’s return to strength.
The Pound depreciated for a third day against the Euro on Monday, falling to its weakest level in 13 months as an industry report showed that UK house prices stagnated in January. Against the US Dollar, the currency dropped to a five-month low.
Mid-week the Pound strengthened against the majority of its major counterparts, climbing from its yearly low against the Euro. The rise was a result of the latest consumer confidence sentiment index that showed an increase from minus 29 to minus 26. House prices in the UK also showed an increase with the average cost of a home rising by 0.5%.
The Pound then weakened against the Euro ahead of the release of the latest UK manufacturing figures. Economists were predicting that the UK’s factory output fell from 51.4 in December to 51 in January. The decline means that Sterling reached its lowest level in more than 13 months against the single currency.
The Yen is continuing to weaken as the Bank of Japan’s monetary easing programme begins to take effect.
On Thursday the Japanese currency tumbled to a new low against the US Dollar and suffered new losses against the Pound and Euro.
Heavy selling of the Aussie Dollar caused the currency to weaken to a three-week low against the Euro. Traders then began to reverse their bets that the Australian economy will remain strong, and that the Eurozone would remain mired in recession.
The currency then strengthened against the majority of its peers due to data showing that business confidence increased by its highest level in a decade in December. The National Australian Bank’s confidence index rose from minus nine to plus three.
On Thursday AUD weakened against the majority of its most traded counterparts due to a decline in Asian stocks sapping demand for higher-yielding assets, and after China, Australia’s biggest trading partner, posted a surprise decline in the strength of its manufacturing output. The Chinese Purchasing Managers Index fell to 50.4 in January, down from 50.6 in December.
Against the Japanese Yen the ‘Aussie’ hit a fresh four-year high as the Bank of Japan’s monetary easing policies continued to take effect.
The ‘Kiwi’ has weakened against the Euro after the single currency continues to perform strongly on the wave of optimism emerging out of Europe.
The NZ Dollar halted its decline against the US Dollar after the nation’s trade deficit narrowed unexpectedly. Imports exceeded exports by NZ$1.21 billion in 2012, compared with last year’s shortfall of NZ$1.87 billion.
The currency then strengthened to a three-month high against the Australian Dollar after the New Zealand Central Bank said that it expects the country’s economy to make a strong recovery. The Bank maintained its benchmark interest rate at 2.5%.
The ‘Kiwi’ soared to an 18-month high against its Australian cousin due to a declining economic picture for the bigger nation. New Zealand is becoming a more attractive destination for investors looking for higher yields as the nation’s Reserve Bank made clear that it would likely hike or maintain interest rates.
The Canadian Dollar fell to its lowest level in six- months against the US Dollar due to a report showing that consumer prices declined by a larger-than-expected margin. The perception that the Canadian economy is slowing has also weighed on the currency.
On Tuesday the currency halted its decline against the US Dollar after falling close to a six-month low.
CAD then declined further against the USD but outperformed other commodity-linked currencies despite an unexpected contraction in the economy of its biggest trading partner (The USA). The currency then rose above parity against the US Dollar and strengthened against the majority of its most traded peers as the Canadian economy posted growth of 0.3%. Economists had been predicting a rise of 0.2%.
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