International Forex Inforamtion

The Japanese currency, often associated with risk aversion by traders due to its relative safety, declined against all major currencies after the Federal Reserve confirmed signs of economic recovery in the American economy.

All currencies gained against the yen this Thursday as the Japanese government stated that national investors bought more assets than sold for the seventh week in a row, adding to the negative outlook for the Japanese currency today. A Federal Reserve statement signaled that the recession might be easing in the United States, creating a bullish pattern for virtually all high-yielding assets and equities markets as a whole, damping demand for the Japanese currency, often purchased when risk aversion is high among traders. Mixed signs regarding the depth of the global slump caused the yen to become extremely volatile having sequential days of losses and gains, creating ideal opportunities for day-traders to profit lately.

Analysts refer to the Fed’s statement as the main driver for the yen’s bearish scenario, being such declaration the reason traders needed to regain confidence and purchase high-yielding currencies fueled by a spree of risk appetite this Thursday in world financial markets. The yen is likely to swing considerably for the next weeks, as the actual global slump scenario remains undefined.

USD/JPY climbed to 96.53 as of 11:24 GMT from 95.45 yesterday. EUR/JPY also rose from 133.80 to 134.45.

The U.S. dollar had a weak performance today losing against most of the major traded currencies, as stocks rose for a third day, mainly in Asia, damping demand for the greenback.

The U.S. currency lost today against 14 of the 16 main currencies, after Dallas Federal Reserve Governor Richard Fisher is likely to include in the next central bank statement that interest rates in the United States will remain at exceptionally low levels, disagreeing with previous forecasts that mentioned an eventual rate hike to follow in the second semester, as long as the rates remain at the present levels, the attractiveness of the greenback is likely to fade, as investors will tend to purchase higher-yielding options. The Australian dollar was one of the biggest winners against the greenback this Friday as commodities prices rebounded, spurring demand for assets in that country.

The current recovery in the stock markets brought risk appetite once again to high levels among traders, which were recently opting for the greenback as a safe refuge during downmarket days, adding to that, lowered expectations for the Fed benchmark interest rate damped even more the weakening demand for the U.S. currency. Analysts affirm that the dollar might enter a new bearish period, if risk aversions continues to fade.

EUR/USD fell and traded at 1.4036 as of 9:41 GMT, from yesterday’s rate of 1.3945. AUD/USD followed the same path and rose from 0.7955 to 0.8041.

The Dollar ended the week losing against several major currencies after China declared this Friday that a supranational currency should be created for regulating international trade, damping demand for the greenback, which is currently the world main reserve currency.

The euro posted the sharpest gains against the U.S. currency after People’s Bank of China stated that the International Monetary Fund should provide alternatives for its members to manage their foreign currency reserves, adding to the already relevant tension around the dollar’s long term future. A rally in Treasuries during the last few days pushed the yield on the benchmark 10-year note down to a level as low as the ones during the worst moments of the global slump, last year, decreasing returns and consequently reflecting negatively on the U.S. currency.

Economists affirm that it is inevitable to avoid the fact that as long as the dollar status as main world currency will be questioned by governments around the world, traders will be not confident to provoke a rally for the greenback, contrarily, it is likely that the dollar will go further down if the uncertainty continues to raise. Currency strategists are split on predictions for the U.S. dollar, and the following weeks will tend to be decisive to determine which direction the greenback will take.

EUR/USD closed the week at 1.4061 raising from 1.3955 on Thursday. USD/JPY closed at 95.17 falling from 95.77.

The British pound had a day of gains versus the euro and the dollar as a new wave of risk appetite struck markets today, influencing investors to purchase assets in British stocks, weighing positively on the national currency.

Today’s gains trimmed the pound losses against the euro this week, in the first negative seven-day period in almost two months, as the FTSE 100 Index climbed 1.3 percent, in a wave of optimism that triggered investors to purchase British assets priced in pounds, favoring the national currency. The pound has been through difficult times with multiple domestic and international factors weighing on its rates, as a political crisis in the parliament added to weak economic data made investors to give up the pound in exchange of the yen, in bearish market days, and to higher-yielding options, when stocks and commodities rallied. Now the situation for the pound has improved as the political situation stabilized and the wave of optimism brought traders back to pound priced positions.

Economists stress on the negative factors who are weighing on the pound, as the U.K. fiscal and debt situation, which even if still influencing the British currency, were not able to contain traders’ risk appetite who pushed the pound against a number of major rivals.

EUR/GBP fell to 0.8529 as of 10:55 GMT from 0.8560. GBP/USD rose to 1.6497 from 1.6240.

The Australian dollar, often referred as the Aussie, fell for the first time in 5 days against the U.S. dollar and other currencies after China’s comments indicating that the greenback will continue to be the main world reserve currency, damping demand for the Australian dollar high-yielding profile.

The Australian dollar had a significant rally last week pushed by a risk aversion decrease, several positive days in stock markets and a rise in commodities prices, being the latter of the most important exports for the nation’s economy. After 5 days climbing against the greenback, China’s comments reaffirming the greenback’s position finally pushed the Aussie down in a rather corrective movement, since even with a bearish pattern formed by a less attractive sentiment towards the Aussie, it still managed to post just a slight fall against the North American currency, which is gaining sharply against other currencies like the euro.

Most of economists agree that there isn’t a sustainable and short-term option to substitute the U.S. dollar as the main world currency, which brought traders to purchase assets in dollar, damping demand for the Aussie, nevertheless, the Aussie has been really bullish during the past week and there isn’t any reason to make it fall considerably, being today’s movement a rather corrective one.

AUD/USD traded at 0.8041 as of 11:20 GMT from 0.8075 when the session opened yesterday, after bottoming at 0.7985, the Aussie keeps strong and has already started a rebound pattern.