is4profit Weekly Currency Report (15th February 2013)
World currency market news for Friday the 15th of February 2013
The Euro weakened to a two-week low against the US Dollar early in the week due to growing concerns over Spain as a scandal on secret cash payments engulfs the Prime Minister Mariano Rajoy. Concerns over Italy have also dragged on the currency as the outcome of the upcoming election becomes increasingly uncertain. It then weakened against the US Dollar and the Pound as the demand for riskier assets declined in the wake of North Korea’s nuclear test and the continuing political uncertainty in the Eurozone. The outcome of the upcoming Italian election is far from certain with Silvio Berlusconi and former comedian Beppe Grillo both in contention to win.
The Euro fell against most of its major peers as Portuguese unemployment rose to its highest level since the Euro’s conception. The struggling nation’s jobless rate increased to 16.9% from 15.8% in the third quarter. The single currency was also not helped by the worse-than-expected contraction of the German economy. It contracted by 0.6% in the last quarter of 2012.
On Friday it had weakened to a two-week low against the Japanese Yen and fell against the US Dollar due to investors cutting bets against the Japanese currency ahead of the G20 summit due to be held in Moscow. The Euro’s weakness against the Dollar was caused by a weakening in demand for riskier assets.
The ‘Greenback’ weakened against the Euro, snapping three-day gains against the single currency due to investors waiting for a speech by the Federal Reserve that is expected to reiterate the case to maintain its monetary stimulus measures.
It then rose to a one-month high against a basket of currencies due to an increase in demand for safe haven currencies. North Korea’s nuclear test spooked investors away from riskier assets. The Dollar was also aided by comments made by a Federal Reserve governor. Jeremy Stein a member of the Federal Reserve’s Open Market Committee added to concerns over the possibility of a junk-bond bubble.
On Friday it weakened against several of its currency peers after a rally in the Japanese Yen pushed the currency lower. It has fallen against the Pound, Australian Dollar and New Zealand Dollar.
The Pound has continued to weaken this week. Midweek the currency weakened for a second day against the US Dollar, falling to its lowest level in six- months due to the UK preparing to sell £4 billion of five-year government securities. Sterling also wasn’t helped by comments made by Bank of England Governor Mervyn King who said that growth in the UK economy will be weak and that the nation faces big challenges.
Against the Euro the Pound recovered some strength due to disappointing jobs data out of Portugal and a surprise contraction of the German economy.
On Friday the latest data for retail sales including fuel were expected to have risen by 0.5% in January compared to the decline of 0.1% seen in December 2012. Instead the data showed a decline of 0.6%. The terrible news will almost certainly lead to a weakening of the currency.
The Yen has been the centre of attention for the markets this week as politicians gather in Moscow for their G-20 summit.
Ministers from Germany and other nation’s have criticised the Japanese for the rapid devaluation of the Yen and have made calls to avert a potential currency war.
The ‘Aussie’ edged higher due to light trading in Asia before slipping. Most of the Asian markets were closed for the Lunar New Year and Japan’s is shut for a public holiday.
It weakened to a three-week low against a basket of its peers after North Korea revealed that it had carried out a nuclear test. The test caused investors to seek safety in the US Dollar and Yen.
On Thursday the currency has rallied to a one-week high as the markets continued to react positively to a rise in domestic consumer confidence. The currency strengthened against the Pound after the Bank of England predicted a sluggish recovery for the UK economy.
On Friday the currency continued its rise upwards after a rally in the Japanese Yen pushed the US Dollar down. House prices in the country rose solidly and consumer confidence rose to its highest level in more than two years. The Reserve Bank of Australia’s recent comments over the strength of the currency could lead to some losses as traders could become concerned that the Bank may take action to lower the ‘Aussie’s’ value.
The ‘Kiwi’ strengthened to its highest level in two and a half years against the Australian Dollar this week due to an expansion in manufacturing in the smaller nation boosting prospects that the Reserve Bank will raise interest rates.
The New Zealand Dollar then hit a 17-month high against the US Dollar, and hit a new record high against Sterling due to the release of upbeat domestic data. The currency has reached its strongest level since September 2011 against its American relative, gaining by 2% this week alone. According to the latest data, retail sales in the country jumped by 2.1% in the fourth quarter of 2012 raising the possibility that the Reserve Bank of New Zealand could raise interest rates.
On Monday the ‘Loonie’ slipped to its weakest level in a month against the US Dollar due to an unexpected drop in employment in January. Concerns are growing that the world’s 11th-largest economy is slowing. The dip saw the currency slip below parity against the ‘Greenback’.
The currency is trading just below parity with the US Dollar and reached a five-month high against the British Pound. A lack of Canadian data should see the currency have a fairly quiet day; any movement will likely be a result of data from the USA and Europe.
The Canadian Dollar made slight gains against the US Dollar on Friday but remains just under parity. The rise came after the price of oil increased. Against the Euro the currency hit a three-week high after the single currency region posted a string of weak GDP data.
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