Dollar Strong Despite Contraction

Despite a 3.8% contraction of the US GDP the dollar remained strong providing investors with Forex opportunity and safe haven. Analysts had expected a 5.5 contraction of the US economy and the news helped to bolster the dollar.  The dollar rose against the Euro and traded at 1.2800 in Thursday’

s late trading.

Rally May Not Last

The dollar remained stable against the Japanese Yen and traded at 89.95 Yen. Kathy Lien a researcher at Global Forex Trading stated, “The smaller drop in GDP drove the US dollar higher against every major currency except for the Japanese yen. However the dollar rally may not last because GDP is a backward looking number. We could still see a larger contraction in growth during the first quarter, especially with the amount of layoffs that have been reported thus far.”

More Unemployment In US

In the US layoffs are expected to continue which could affect the dollar and the Forex investment opportunities it has provided. Analysts say that both the dollar and the Yen are being driven by investor risk aversion as both currencies are seen as the safest in today’

s economic climate. A report quoting billionaire investor George Soros stating that he believes the Euro might not survive if the Euro Zone does not do more addressing the issue of toxic assets further weakened the Euro.

Euro Under Pressure

At present the perception is that the US was the first to deal with the credit crisis and that the US will recover sooner than the Euro Zone. This makes the dollar and the Forex opportunities it provides attractive to investors looking for a safe place to park their money. The Euro also came under pressure from reports that the European Central Bank may slash interest rates even further.

In today’

s markets negative data seems to be the rule rather than the exception. For those with patience and discipline Forex investment opportunities are still out there.

Risk Appetite/Aversion a See Saw Act

Lately risk appetite and risk aversion have been performing a see saw act. One week its risk aversion, the next, returning risk appetite. Obviously a return to risk appetite will provide investors with more Forex opportunity than risk aversion. Traditionally the US dollar and the Japanese Yen benefit from risk aversion as investors seek a safe haven from uncertain and volatile markets. Currency strategist Matthew Strauss had this to say about changing risk appetite, “

Japan’s action earlier in the day had contributed to some risk-taking, but investors are still cautious. I wouldn’t put too much into today’s lower risk aversion, because risk appetite can change overnight.”

Higher Yielding Currencies Benefit

On Tuesday a modest increase in risk appetite benefited some higher yielding currencies such as the New Zealand and Australian Dollars as investors took advantage of Forex investment opportunity caused by a global rise in stock markets. All eyes are on the newly confirmed Treasury Secretary Timothy Geithner. Investors are hoping Geithner will move quickly to address the worst economic downturn in decades.

Japan Rescues Troubled Companies

The Japanese government launched a $16.7 billion dollar plan to buy shares in many troubled companies affected by the economic downturn. The move heightened risk appetite and sent investors to the Forex opportunities offered by higher yielding currencies. The Nikkei exchange rose almost 5% during the day on Tuesday. Matthew Strauss, currency strategist at RBC Capital Markets, stated, “We’re seeing a slight increase in risk appetite as most stock markets have risen and therefore we’re seeing dollar/yen gain a little bit.”

Euro Posts Slight Gains

The Euro rose for the first time in weeks and many short term investors took advantage of the Forex opportunity offer by the slight gain. Gains are expected to be short lived as data from the Euro Zone continues to be troubling. Investors will be watching for developments coming out of the Federal Reserve meeting which begins Wednesday and is expected to last two days. Any actions taken by the Fed are bound to affect currency markets and the Forex opportunity they provide.

Pound at 23 Year Low Against the Dollar

The British fell further on Thursday after reaching a 23 year low against the US dollar amid fears that the UK is heading for a severe financial crisis. The pound briefly fell more than 2%during Thursdays trading, hovering above $1.3620 and offered little Forex opportunity. UK stock markets remained volatile after suffering major losses earlier in the week. Many believe that another government bailout plan may not be enough to save the banking sector.

UK Financial Sector Under Immense Strain

Recently released figures showed a decline in UK factory orders and a drop in automobile production prompting a selloff of the beleaguered Pound. Many believe that Bank of England will have to do more than cut interest rates to rescue the economy. The Pound continued to suffer from risk aversion and limited Forex opportunities. Lee Hardman, currency analyst at BTM UFJ in London stated, “The major theme in the UK is the financial sector, which is still under immense strain. The market is taking the view that nationalization of at least part of the UK banking sector is almost inevitable and this is weighing on sterling.”

Pound May Fall Further

The fall follows the news that the Bank of Scotland posted the largest financial losses in British history which has weighed heavily on the British financial sector. Many expect the Pound to fall to $1.32-1.30 against the US dollar before recovering. Since the beginning of this week the Pound has fallen 7% its biggest weekly fall since late October. The Pound has declined by 30% since July, 2008 when the Pound bought $2.00. Investors are selling the Pound and taking advantage of the Forex opportunities offered by other currencies.

Bank Of Scotland Posts Record Losses

The losses posted by the Bank of Scotland highlighted the dire condition of the British financial industry. Many believe that further government intervention is necessary. Bank of England Governor Mervyn King said that policymakers need to consider new ways to stimulate the economy such as buying assets as interest rates, already slashed to 1.5%, are headed towards zero.

Dollar and Yen Still Strong

While the Pound continues to fall the US dollar and the Japanese Yen continue to perform strongly and still offer Forex opportunities to savvy investors. Both the European Union and the UK now realize that the global recession is more severe than was once thought. Hopefully both the EU and the UK will take the actions necessary to bring about recovery.

No ‘Obama Bounce’ in Markets

Many investors were expecting what has been called the ‘Obama bounce’ in markets. Instead the S&P fell to an inauguration day record. Actually, based on 5 decades of data the Dow fell more often than it rose on Inauguration Day. Since by and large Forex markets follow equity markets there has been a slide in major currency pairs and limited Forex opportunity.

Dollar Declines Against Yen

The dollar has risen against the Euro and British pound but it has declined against the Japanese Yen. The dollars performance reflects a flight to safety and does not reflect optimism but pessimism. Newly elected Obama inherits an economy in shambles and many think that the first 100 days of a new administration can define a presidency. Obama is expected to announce many reforms and new monetary policies that can either increase or decrease Forex opportunities.

History On Obama’s Side

Historically Stocks rose in the first 100 days of a President’s term 11 out of 16 times. Political party doesn’t really matter but of the 5 times that equities dropped in the first 100 days, 4 out of the 5 were during Republican Presidencies. The good news is that although Obama has been handed a dismal economy, history is on his side and many economists expect to be celebrating a stronger stock market after the first 100 days of his presidency. Currency markets will most likely follow suit resulting in increased Forex opportunity.

World’s Eyes on Obama

The global economic news has not been good and the world’s eyes are on Obama and the United States which is seen as very proactive in addressing the global recession. In contrast the Euro Zone and the UK are seen as behind the curve in taking necessary action to stem the growing Euro Zone recession. In his inauguration address Obama state, “Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.”

Obama Administration to Make Economy First Priority

It is a given that the Obama administration will make the economy their first priority. A strong US economy is necessary for the function of the global economy. A smoothly functioning global economy translates into increased Forex opportunities for investors. At present all eyes are on Obama and the new administration.

Yen Falls

The Yen fell on Monday as rising stock markets helped to promote risk appetite and sent many investors in search of Forex opportunities offered by higher yielding currencies. Trade in the US was subdued due to the Martin Luther King national holiday. Concerns about the troubled US financial sector receded reducing demand for safe haven currencies such as the US dollar and the Japanese Yen.

Analysts Cautious About Sustainability of Gains

Some analysts stated the Forex market was cautious about the sustainability of gains in share prices and remain cautious about the global economy. Yousuke Hosokawa, treasury department senior manager at Chuo Mitsui Trust and Banking Co. stated, “The currency market lacks direction and is moving within limited ranges. Gains in U.S. shares were within the range of rebounds and the U.S. financial sector still faces difficult times.” The return of risk appetite is providing short term Forex opportunities for many investors.

Bank of America and CitiGroup Report Losses

Both Bank of America and Citigroup both reported multibillion dollar quarterly losses on Friday. CitiGroup indicated they would split into two operating units. Despite massive Government intervention, many investors remain wary of the fate of Citigroup and the US financial sector in general.

Many Forex traders remained on the sidelines in anticipation of Obama’s inauguration on Tuesday. The incoming administration’

s monetary policies will affect available Forex opportunities and currency markets globally.

Dollar and Euro Rise

The dollar rose 0.4% from late New York trade on Friday to 91.03 Yen while the euro climbed 0.7% 121.50 Yen, and climbed by 0.3 % to $1.3348. The dollar index was down 0.7% at 83.587. Investors took advantage of Forex opportunities offered by higher-yielding currencies such as the Australian and New Zealand dollars which are seen as a measure of risk appetite. The Australian Dollar rose 0.8% to $0.6786 and against the yen was up 0.4% t at 61.78 Yen. The New Zealand dollar rose 0.6% to $0.5511 and 0.2% to 50.15 Yen.

New Administration, New Policies

A new administration takes the reins pf power in Washington Tuesday and will most likely make the economy a very high priority. Just how those unannounced policies will affect markets and Forex opportunities remains to be seen.

Job Losses Not As Bad As Expected

The US dollar rallied in Fridays trading following a jobs report with data that was not as bad as originally thought. Data in the report showed that job losses were not as bad as had been feared. It was originally thought that about 550,000 jobs had been lost and many investors breathed a sigh of relief when the report showed job losses of 524,000.

Return to Risk Aversion

At present it looks as though the dollar will continue to provide investors with a safe haven and Forex opportunity. Many analysts see a return to risk aversion which will help the dollar and Yen due to their reputations as safe havens in times of economic crisis. Despite 12 straight months of job losses and weak economic data the dollar continues to provide Forex opportunities for traders and investors.

Euro Zone Economy Deteriorating

The already beleaguered Euro fell further after data revealed a deteriorating Euro Zone economy. Data showed a bigger-than-expected drop in French industrial production which put more pressure on the Euro. The Euro received little support from an unexpected rise in euro zone retail sales and consumer demand in the Euro Zone remains weak.

Yen Makes Gains

Another currency that has been helped by the global financial crisis is the Japanese Yen. Like the dollar the Yen provides Forex opportunities and is seen as a safe haven currency. In Mondays trading the Yen reached a one-month high against the Euro. Heightened risk aversion boosted demand for the low-yielding yen, as well as the U.S. dollar, as investors rushed towards safer assets. Currency economist Lee Hardman stated, “The U.S. payrolls numbers were pretty dreadful and helped underline fears that the U.S. labor market is undergoing a severe deterioration, knocking market confidence and helping to fuel yen gains.”

All Eyes on European Central Bank

Many Forex traders will be watching the European Central Bank which is expected to aggressively cut rates later in the week. Hopefully the move will stimulate European markets and provide even more Forex opportunity for investors.

Dollar Makes Sharp Gains

On Monday the US dollar made sharp gains against the Euro and the Japanese Yen prompted by the stimulus plan announced by the incoming Obama administration and the anticipated cuts by Central banks. Investors were pleased by the Forex opportunities offered by the new administrations plans to institute a proposed stimulus package that could be worth up to $775 billion. The Obama administration is also seeking $310 billion in tax cuts.

Fed and Treasury Pro Active Addressing Crisis

Ron Simpson, director of currency research at Action Economics had this to say, “The combination of tax cuts, infrastructure spending and job creation under the Obama stimulus package takes out some of the pain from the economic recession we’re in. The Federal Reserve and U.S. Treasury are being pro-active in dealing with this crisis. I think at some juncture, the U.S. efforts would turn the economy around quicker than many of the other countries and that should be dollar-positive.â€



Yen at Three Week Low

The Yen fell to three week lows as risk appetite and Forex opportunity returns amid hopes for global economic recovery and stock market gains. Some analysts believe that the Euro’s recent gains were too fast given the dismal state of the Euro Zone economy. Against the yen, the dollar climbed to 93.56 yen its highest since December 8. The Japanese currency gained 19% in 2008 as investors sold assets financed with the Yen’

s cheap rates and took advantage of the Forex opportunities offered by the Yen.

ECB Says More Rate Cuts Needed

The Euro fell after ECB Vice President Lucas Papademos said that more rate cuts may be needed to shield the Euro Zone from a deeper recession. Previously ECB officials have resisted aggressive rate cuts. Figures released Monday showed consumer price growth slowing in December and similar Spanish data showed inflation tumbled to a 10-year low. These figures are putting pressure on the Central Bank to cut rates further.

Many expect the costs of borrowing to fall sharply to 1.75%. Tightening conditions may prompt the ECB to cut rates more aggressively than expected and may also cause a drop in the Euro Dollar rate. Hopefully these moves will create more Forex opportunity for both traders and investors.

Investors Sell Euros

The US dollar gained early in 2009 as investors sold Euros after data showed a deepening recession in the Euro Zone. Forex investors and traders also realized that the Euros gains in November were unsustainable. Low trading volumes during the holidays also affected currency markets and the Forex opportunities they normally provide. Dustin Reid, director of Forex strategy at RBS Global Banking & Markets stated, “Indeed markets are thin as many are opting to take today off. “As a consequence, we will not likely see full liquidity back into markets until next week or possibly even the week after.”

Eurozone Manufacturing at 11 Year Low

Euro Zone manufacturing activity fell to an eleven year low which was well below market forecasts. Recently investors have taken advantage of the Forex opportunities offered by the Euro as the US Federal Reserve cut interest rates to near zero, while the European Central Bank has adopted a more gradual approach to cutting interest rates.

Daragh Maher, currency strategist at Calyon in London stated, “Currency markets will struggle to balance the Euro’s upside from interest rates not being cut aggressively with the concern that the economy is destined for a sharp deterioration on the back of this measured policy reaction.”

Pound Falls Further

The Pound fell after data revealed a dismal image of the economy in the UK. Recently the Pound had cone close to parity with the troubled Euro. British mortgage approvals fell to record lows in November and a survey conducted by the Bank of England said that credit conditions will tighten over the next three months. Home prices also declined 2.2% in December.

Dollar Still Offers Safe Haven

Many investors are once again taking advantage of the Forex opportunities and safe haven offered by the US dollar. Market activity is traditionally slow during the holiday season and it is expected that markets will return to normal activity this week.

Bush Administrations Announces Auto Bailout

Last week was a busy one for Forex trading as several countries released economic and employment data. Most of the news was not good but on Friday the Bush administration announced that they would tap the Troubled Asset Relief Funds (TARP) to bailout the ailing US auto industry. Previous to the announcement the dollar was down against the Euro and Yen but quickly regained ground with the bailout announcement.

Dollar Rises

After the announcement many took advantage of the Forex opportunities the announcement provided to otherwise skittish investors and bought dollar backed assets. Many economists believe the Dollar was highly oversold last week and is currently positioned to regain last week’s losses and potentially even strengthen more in the coming months.

Calm Week Expected

This week is expected to be somewhat calm marketwise as Forex and stock and commodities traders take time off for Christmas. Tomorrow, December 23^rd, the US will release important housing data that should give some insight into the US economy and could affect the dollar and Forex investment opportunities.

Wall Street Reacts

The auto bailout has helped Wall Street regain some measure of confidence and markets quickly reacted to the announcement of the bailout agreement. It has been estimated that the US would face over 2 million lost jobs if the automakers failed and would have a ripple effect throughout the US economy.

For the immediate future things are looking up for the dollar although a small number of economists remain skeptical. At present the dollar is seen as a safe haven and is still the world’s reserve currency. The coming holiday week promises to be a quiet one and we at Forexopportunity.org. wish our readers the happiest of holidays.

Dollar Falls

The US dollar fell on Wednesday and reached a 2 ½ month low against the Euro after the Federal Reserve slashed interest rates to between zero and 0.25%. The Euro reached a high of $1.4192 after the Federal Reserve said it would use “all available tools” to combat the ongoing recession and slashed rates to between zero and 0.25%. The Fed also added that it was considering possible purchases of longer-term U.S. Treasury debt.

Traders Sell Dollars

The announcement had traders taking advantage of this Forex opportunity to sell off dollars helping the Euro gain 11% this month. Adarsh Sinha, currency strategist at Barclays Capital in London. Stated, “

The Fed had an explicit commitment that they will leave interest rates very low for an extended period and that’s quite negative for the dollar because of relative interest rates. I guess the question now is: is this the beginning of a big move for the dollar, say euro/dollar to $1.60?”

Dollar Falls Against Yen

The dollar fell 0.3% against the Yen to 88.70. Yen gains against the Dollar helped to push the euro down 0.5 percent to 124.75 Yen. The yen has gained in recent months as investors unwound carry trades, reducing exposure to riskier and higher-yielding assets as the financial crisis mushroomed. The Yen has provided investors with Forex opportunities in the past because of its low rates.

Bank of Japan to Reduce Rates

There is speculation that the Bank of Japan would reduce rates to almost zero following a two day meeting which ends Friday. Bank of America G10 currency strategist David Powell stated, “With rates in Japan now higher than Fed rates, this puts further downward pressure on dollar/yen. It also increases the possibility that the BOJ will cut rates by 20 basis points on Friday.” Some Forex brokers are wary about the risk of Japan intervening to rein in the yen’s climb, which is hurting the nation’s exporters.

Currency markets can be volatile and the global economic crisis has both traders and investors watching closely for Forex opportunities that present themselves on a daily basis. This week has been a busy one with several countries releasing economic data that could affect Forex opportunities and both traders and investors will be watching closely.