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Forex Analysis:::2009-07-31T16:31:55

Forex market appraisal

NZD

On Thursday, the New Zealand dollar fell to its week low at 0.6478 after the New Zealand bank announced that it is to continue the key interest rate lowering if the national currency doesn\'t move down from almost 9-month high. The most part of NZ Reserve Bank Head sentiments Alan Bollard was aimed to the rate decrease of New Zealand.
Bollard said that economic revival expected by Reserve Bank is mostly due to further easing of severe financial conditions. «If there is no easing then recovery which is widely expected can turn out to be under threat. Amid this we have to revise the policy», said Bollard hinting that further will follow the interest rate lowering, if the kiwi doesn\'t tick down.
Hereafter, the NZD/USD was trying to recoup losses and rallied to 0,6541. The pair\'s sales are likely to end and presently, the New Zealand currency will behave itself in accordance with the investors respond to risk and shares market sentiment. The NZ Reserve Bank announcements showing a soft monetary policy inclination and comments regarding the national currency will not influence the kiwi for too long, as global positive data signals that investors\' risk inclination will support the NZ dollar.

CHF
Easing in the markets will probably help the Switzerland National Bank. During last 5 months the central bank was ready to accomplish the currency intervention to preclude the other decline of EUR/CHF below 1.50, which could disserve the export of Switzerland.
Apart from permament verbal warnings the central bank had to intervene to the currency market development al least twice selling the national currency to decrease the investors\' demand on franc. Nevertheless, there appeared some signs of that the National Bank of Switzerland may stand back soon.
During the last week the spread between the Switzerland and Eurozone earnings increased in favour of Euro, and the optimistic mood concerning the global economy recovery. This, in its turn, partly neutralized the upside pressure on franc as asylum-currency. The spread between the Swiss and Eurozone earnings used to have high correlation with the EUR/CHF rate, that points to that the European currency is going to grow, as a result, the experts making the currency market forecasts suggest that EUR/CHF ia most likely to rally to 1,5450, rather than to 1,50.
As a rule, franc obtained support when there was witnessed investors\' inwillingness to risk, as the market participants were aiming to invest their funds into assets, which are considered as safe, despite some concerns regarding the Switzerland economic sentiment. Though, the investors\' risk inclination may weaken in a short term, the general trend of investors attitude to risk is positive, as the world leading economies, such as the USA and especially Australia are likely to be on the rebound.
For its part, the National Bank of Switzerland seems to be satisfied with the results of taken measures. At the same time, member of the central bank Executive Board Thomas Jordan announced that implemented currency interventions had success and that the bank is ready to continue take measures if required.

EUR

Euro began trading on the upside against the U.S.dollar and Japanese yen during the Tokyo session on Thursday, as Asian market participants began buying the European currency after witnessed drop in the New York trading.
On Thursday, at the beginning of the Asian session the market players were looking for an opportunity to buy Euro at low price after falling to 2-week low versus the U.S.dollar. Low Euro rate was especially attractive for the market participants, who were correcting the positions because of the month end.
Till the late week the market players will watch closely the Asian stock indexes after the Shanghai Composite Index contracted by 5%, compared to the previous day closing. This set the lowest point from the mid November. Although Shanghai Composite Index decreasing pace slowed during the deals on Thursday, another sharp fall will make the investors sell the single currency in favour of more safe currencies, such as dollar and yen.
The preceding reversal of Euro signals the uncertainty of investors risk inclination, as they still aim to the dollar having the slightest chance. Aside from this, positions volume reduction on risky currencies on Wednesday is due to the concerns regarding that China will restrict the bank lending, as the Chinese economy growth is the main issue in discussions concerning the global economy recovery prospects.
Then, Euro decreased slightly against the American currency, compared to Wednesday closing after annual IMF report release from the Eurozone and continued trading around these weak levels.
The IMF report said that the banking sector health — is the key factor of economic revival. IMF called the European Central Bank to continue support by the monetary policy to stimulate the extension of private sector funding. It also said that the Eurozone economy has faced a strong deflational pressure, also was noticed an overvaluation of the Euro at current levels, that increased the downside pressure on the 16-nation currency.
Meanwhile, the published jobless rate data impacted negatively this currency. The number of unemployed in Germany, the largest economy in Europe, fell more significantly in July than it was expected. However, these figures don\'t involve 30 000 of unemployed, which take part in the professional training program financed by the German government. Apart from this, the jobless rate stood at lower level due to huge state subsidies, which are paid to the companies to cut the week working hours not dismissing the employees. The German Federal Labor Office, which reported the jobless rate figures on Thursday, as well as independent analysts suggested once again that the unemployment rate will rise by 1 million or more during the next year becasuse of the most severe recession for the last 60 years.

USD

The dollar was trading downwards versus the yen, as the Japanese exporters were selling the American currency for the purpose of carrying out the other calculations in view of the month ending.
The People\'s Bank of China Chairman Su Nin pushed the greenback to the downside. Nin eased the concerns of the stock market participants regarding the shares, giving a promise that the Central bank will continue accomplishing a «moderate» monetary policy, that again put the downward pressure on dollar. Nevertheless, the currency rates lowering was limited amid the concerns about the world economic condition and auction results on the U.S. Treasury bonds allocation, which had place this week, not stimaulating the demand from the abroad investors, rather than auctions witnessed earlier. This had increased the investors\' concerns of probability that the U.S.authorities will face some problems backing up the deficit. However, the American currency will trade better than the other majors, obtaining support from substantial volume of net short speculative positions. Even so, possible dollar sales at the end of the month and Toshin securities issue may restrain the greenback rally. On the whole, the marker participants mood will mostly depend on the economic data. Herewith, the investors will look for approvals of that the revival after the downturn period is seen in all economies of the world.

Kind regards,

Analyst: Vladimir Donin

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