Russian Ruble: Poised to Break Through Target

Ruble continues to decline on currency marketOne of more interesting currency market dramas playing out right now is that of the Russian ruble. The government has set a target level of 36 per dollar, but that seems as though it could be smashed fairly soon.

In the last two days, the ruble has declined about 5.5%, and not much more is needed to push the currency below the target. The global financial crisis and recession, coupled with dramatically sliding oil prices, has wreaked havoc with the ruble on the forex market.

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• Forex Trading on the Currency Market
  More than 160 currency pairs on the forex market
• More on the Russian Ruble
  The ruble on the forex market

Euro Forex Trading Forecast

Euro could be in danger
The euro forex trading forecast continues to look bleak — at least against the U.S. dollar. Indeed, George Soros is warning that the euro could face its demise in this financial crisis, reports Bloomberg:

Economic data coming out of the euro zone is weak, and Jean-Claude Trichet, the president of the European Central Bank, has had to issue warnings to banks against hoarding capital. It is clear that stronger action may need to be taken by the EU if the euro is to survive.

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• Euro in Forex Trading
  Forex trading forecast for a variety of currencies

U.S. Dollar Roaring Back Today in Forex Trading

Bad economic news sends safe haven demand for dollar higher
The U.S. dollar is strengthening again in forex trading on the currency market. After softening yesterday on the prospect of an economic stimulus bill in the House, the greenback is gaining again in currency trading.

First of all, the economic stimulus bill is not considered "enough" by some. Goldman Sachs economists have called it a "first step." Additionally, economic data — including unemployment numbers and home sales — have been weak, leading to speculation that the U.S. economy is still in trouble.

And, since the U.S. dollar has decoupled from economic fundamentals for now, any news that’s bad for the economy is good for the greenback in currency trading. So the U.S. dollar is gaining in forex trading as investors seek the protection of a safe haven.

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• More on the U.S. Dollar in Forex Trading
  Currency trading with the greenback
• The Greenback in Currency Trading
  Forex trading on the currency market

Financial News: Economic Stimulus Package Passed in the House

Tax cuts, massive spending highlights of economic stimulus bill
The most recent economic stimulus bill has passed hurdle #1 for becoming law: It has been passed in the U.S. House of Representatives. Here are some of the highlights regarding what is contained in this economic stimulus package:

• Tax cuts for businesses and for individuals. Businesses will get billion in tax cuts, while individuals receive either 0 or ,000 spread out over two years.
• Spending for infrastructure and renewable energy. This should help provide jobs, and benefit the economy in the long term.
• Education spending to help college students and secondary students.

Additionally, there were measures to spend money on STD education, a supercomputer and to update and repair national treasures, such as the National Mall.

It will be interesting to see how the House version reconciles with the more expensive Senate version. In any case, Congressional Democrats hope that it is a done deal by the middle of next month.

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• The Economy and Forex Trading
  Currency trading on the FX market

London Session – January 29, 2009 8:20 AM

The London session saw a modest return to risk in FX as the overnight selloff looks to have been deemed overdone. EUR/USD rose about 55 pips and was sitting near 1.3140 just ahead of the NY session. This was despite a bad batch of data as German unemployment ticked up more than expected to 7.8% from 7.7% while eurozone consumer confidence was a weak -31 in January from -30 previously. Full text »

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Asia Session – January 29, 2009 1:39 AM

The big move of the Asian session was very early on indeed, as the Royal Bank of New Zealand cut rates by 150 basis points, 50 basis points greater than most predicted, to 3.50%, the lowest rate on record for New Zealand. The NZD/USD pair’s reaction was immediate and brutal, as the pair went from 0.5372 highs just prior to the data release, to bottom out at 0.5186 with in an hour. The pair did bounce from there, perhaps 60 pips, but it was the proverbial “dead cat bounce”, as the pair subsequently got as low as 0.5146. As could be expected, AUD/NZD exploded through the session, hitting a six month high, starting near 1.2500 and ending the session near the 1.2787 highs. Be aware that the RBA will meet early next week, and the expectations are for a cut of 100 basis points to put Australia’s rate at 3.25%. Full text »

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New York Session – January 28, 2009 4:43 PM

The price action in NY was relatively mild up until the FOMC and RBNZ rate decisions/statements. The Fed’s statement was little changed but the fact that they reinforced their willingness to support the markets via more purchases of MBS and other paper put a bid under the USD and stocks. This broke the recent negative correlation between the buck (which is viewed as a safe haven) and equities. The Fed also noted that they would look to purchase Treasuries if necessary but the fact that they did not say they were pursuing this outright saw bond prices little changed overall. Full text »

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Even with Yen Lower Today, Intervention on the Table

Japanese yen in currency trading
The Japanese yen, like the U.S. dollar, has been seen as a safe haven currency through this financial crisis and global recession. However, like the dollar, the yen is down right now in forex trading. This is because as optimism rises for plans of economic stimulus, demand for safe havens decline — risk appetite is improving.

But that does not mean that the Japanese government has completely abandoned its plans to possibly intervene in the FX market. After all, even though the yen is lower in forex trading, it is still at levels not seen for years. And the possibility of upward momentum is still there, since after the economic stimulus package is passed, it may not be deemed enough to reverse the current recession.

However, even as montary leaders in Japan consider releasing its reserves into the market to reduce the value of the yen, there is reluctance: The G8 disapproves, and Japan doesn’t want to run the risk.

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• More on the Safe Haven Currencies
  Yen, dollar in forex trading
• Japanese Yen in Currency Trading
  Forex trading with world currencies

U.S. Dollar Softer in Currency Trading

Greenback lower in forex trading on Fed and economic stimulus hopes
Interestingly enough, in the case of the U.S. dollar in currency trading, a stronger economy does not necessarily mean better performance on the FX market. Indeed, dollar strength lately has been hinging on the problems with the global economy, creating a safe haven demand for the relatively stable greenback.

Now, though, with the prospect of economic stimulus, comes the prospect of a weaker dollar. The euro is gaining in forex trading against the greenback right now. This is due mainly to two factors:

1. Speculation that the Fed may consider buying Treasuries is leading to speculation that the Fed will continue to play a big role in attempts at stimulating the economy.
2. The House is considering the economic stimulus package championed by President Barack Obama.

This likelihood of additional government spending and potential economic stimulus means that, more than likely, forex traders will turn to riskier, higher yielding assets — possibly bringing the greenback lower in forex trading.

See Also

• More on Using FOMC Announcements to Your Advantage
  Learn about using the Fed as you make forex trading decisions
• Greenback in Forex Trading
  Currency trading on the FX market

Fed Rate Decision: Not Really Waiting for a Rate Decision at All

Investors more interested in what the FOMC has to say about the economy
Right now, the Federal Open Market Committee (FOMC) is having a meeting. Up for discussion? Probably not the interest rate. Right now, the rate is set at between 0% and 0.25%. And the Fed has expressed a desire to keep it that way for a few months.

So why is the FOMC meeting?

Well, it has to retain its relevancy somehow. The FOMC will continue with regular meetings so that it can issue statements on the health of the economy. Additionally, the FOMC is likely to announce measures that illustrate a desire to help with economic stimulus.

Today, there is speculation that instead of an interest rate announcement, we will get a plan for the Fed to start buying Treasuries. This is by no means certain, but there has been interest expressed in having the Fed buy long-term securities in order to help loosen the flow of money through the markets. We will have to wait for the announcement to see whether this actually happens, though.

See Also

• Fed Interest Rate Announcements and Forex Trading
  Currency trading on the FX market

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