Asia Session – March 31, 2009 10:53 PM

March 31, 2009

Today’s Asia session was all about the ever important Tankan report.  Now more than in previous years, Forex traders looked to the results with great interest.  They would not be disappointed.  The report indicated that business confidence sunk to all time lows and sent the JPY tumbling.  USDJPY dashed from the 98.80 area to soar around the 99.50 area.  EURJPY caught a bid as well, making a run at NY highs and just falling short around the 131.50 neighborhood.  Full text » | Technorati | Stumble It!

New York Session – March 31, 2009 4:37 PM

March 31, 2009

The culmination of month and quarter-end flows threw a curveball into market correlations in a NY session that witnessed stocks and the USD move higher in tandem. Equities managed to eke out a modest +1.3% rally as a late session decline pared earlier gains. The S&P close below 800 for the second day in a row is an ominous sign as we head into the second quarter. Gold traded in a relatively tight range and was about + higher near 918/919 as the session approached the close. Full text » | Technorati | Stumble It!

Is the U.S. Economy on the Road to Recovery?

March 31, 2009

Retail sales show gains, could indicate economic turnaround

The U.S. economy might be on the road to recovery, if one looks at retail sales data. Even though consumer confidence remains near historic lows, there has been some gains in spending. The Street reports on the improvement in retail sales since November:

A sharp turnaround in retail stocks since November could be hinting at an economic recovery sooner than economists are predicting, although analysts are unsure whether the valuation and sentiment is a good mix for investors looking to bet on a rebound. 

As you can see, there are some misgivings about this turnaround. However, if retail sales are hailing an economic recovery, it is likely to result in more weakness for the U.S. dollar. Things have been volatile the last couple of days, but as things improve on the global economic stage, the greenback is likely to even out a bit — on the downside.

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U.S. Consumer Confidence Continues to Struggle

March 31, 2009

U.S. dollar correction in currency trading

Despite the recent news that U.S. consumer spending saw improvement in February, consumer confidence surveys still show this economic indicator near lows. Consumer confidence did see a marginal improvement, but nothing like some are hoping.

A new report by the Organization of Economic Cooperation and Development (OECD) insists that government policies now in motion will prevent a depression, and there is speculation that if the report is publicized, it could help consumer confidence see some substantial improvement.

The U.S. dollar saw a bit of a correction earlier on a variety of data and news, but with the euro zone economy showing signs of weakness, and with an expected ECB rate cut on Thursday, the greenback is edging higher against the euro in forex trading.

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Risk Appetite Favors Commodity Currencies

March 31, 2009

Japanese yen falls in forex trading

Yesterday, risk aversion sent the Japanese yen higher in forex trading. Today, the story is reversed, underscoring the volatility of the FX market. Then yen is moving lower in currency trading today as risk appetite increases and the carry trade makes a bit of a comeback.

Commodity currencies — especially the Australian dollar — are making solid gains against the yen in forex trading. The superior yields offered by commodity currencies are creating a situation in which forex traders are trying their luck at the carry trade. 

With the U.S. stock market gaining this morning, a return to a certain level of risk appetite is being seen, and that is favoring currencies with higher yields.

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Euro Pulls Back in Forex Trading

March 31, 2009

Rate cut, labor data send euro lower in currency trading

The euro is pulling back in forex trading on the currency market today. After a rally, the euro is fading as economic realities catch up with the 15-nation currency. The main issues sending the euro a bit lower right now are:

  1. Poor labor data is leading to concerns about the health of the euro zone economy.
  2. An expected ECB rate cut is creating demand for other currencies.

The euro, which had been seeing a rally in currency trading, is now pulling back and the enthusiasm for the euro is fading. As one of the few currencies not engaged in very aggressive economic stimulus, the euro is being punished — especially as economic data continues to show that the euro zone could use a little help.

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World Bank to Create $50 Billion Trade Fund — U.S. Dollar Not Threatened

March 31, 2009

No real threat to the U.S. dollar as the world’s reserve currency?

The news ahead of the G20 summit later this week is all about a proposal from China — and backed by Russia — to create a new reserve currency system in the form of special drawing rights on the IMF.

However, despite all of the play it is getting, the idea hasn’t been well-received by most of the economically developed nations. At any rate, reports FX Street, the U.S. dollar is likely safe as the world’s reserve currency:

There looks to be little, if any, credible threat to the US dollar’s status as world reserve currency. Even if talk on SDRs does gain momentum at or after the G20, there’s still little chance of dethroning the dollar without more detailed proposals with legitimate

World Bank President Robert Zoellick said recently, "to create a reserve currency you need to have more than a summit or a meeting, you have to create financial markets where people feel comfortable moving in and out of the currency."

Even though World Bank is planning to create a billion trade fund, it is unlikely to have any sort of impact on reserve currency status. It is merely something designed to help ease the flow of money through the global financial system.

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London Session – March 31, 2009 8:09 AM

March 31, 2009

Month and quarter-end flows continued to move markets into the London session and thus far the appetite has been for more risk. European bourses have added 1.7% thus far while stock futures in the US are pointing to a 1.0% open. Gold is up a modest near 918/919 and ostensibly continues to be supported by G-20 talk of potentially adding the precious metal to the IMF’s SDR basket. The move to more risk and dollar selling for the month and quarter-end fix drove FX markets overall. Full text » | Technorati | Stumble It!

Asia Session – March 30, 2009 11:44 PM

March 30, 2009

Forex traders were treated to an Asia session of exceptional volatility.  With no top tier data to act as a catalyst for the market, momentum traders ruled the day.  After seeing a bit of JPY strength on the onset of the session, the currency quickly gave way to sellers.  USDJPY shot from session lows around 97.30 to test the 98.50 area.  EURJPY saw similar price action, after hitting lows around 128.30, the pair rocketed 200+ pips back through the 130 handle. Full text » | Technorati | Stumble It!

New York Session – March 30, 2009 5:22 PM

March 30, 2009

The risk aversion witnessed overnight carried on into the NY session, with US equities plunging -3.5% and the S&P closing below the key 50-day moving average. Oil suffered a -7.5% slip and was sitting just above .50/bbl after the drop through /bbl saw selling pressure emerge. Gold was higher initially but ended the session near the 914/915 open. Full text » | Technorati | Stumble It!

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