U.S. Dollar Higher on Risk Aversion

July 30, 2010

Greenback gains in currency trading

The U.S. dollar is higher today on risk aversion, moving up as investors look for a little safety amidst the uncertainty. 

Economic news out of Japan is causing disappointment and concern, and U.S. GDP data shows that economic growth is decelerating. Quarter 2 data came in just below expectations, and that is causing some concern for forex traders.

As a result, it is little surprise that the greenback is gaining in currency trading on the FX market. Forex traders are back in capital preservation mode.

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Euro Pulls Back in Forex Trading

July 30, 2010

EUR/USD retreats on currency market

The euro is pulling back in forex trading on the currency market today as concerns about the economy become uppermost. Euro has been falling against the U.S. dollar due to profit taking after its good run earlier this week, but some of the concern is also waning risk appetite.

Concerns about economic recovery are asserting themselves as retail sales miss the mark, and as concerns about second quarter GDP mount.

EUR/USD is still above the 1.30 level on the currency market, but it remains to be seen how long the currency pair can retain its position.

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London Session – July 30, 2010 6:26 AM

July 30, 2010

There has been a clear retrenchment of risk appetite this morning.  This may be related to month end activity but is also likely a function of disappointing Japanese economic data overnight, dovish remarks from the Fed’s Bullard and fears that this afternoon’s US GDP release could further undermine optimism with respect to the strength of the US economy.  Having pushed up to USD1.3090 early in the European session, the EUR has been toppled back below the 1.3000 level.  USD/JPY has registered a fall to 86.20 while EUR/JPY is pushing below 112.20.  Full text »

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Asia Session – July 30, 2010 3:45 AM

July 30, 2010

The yen strength continued into Asian trading today with the USD/JPY dropping to an eight month low at 86.25 as the dollar weakened. Earlier comments in New York from Federal Reserve St. Louis President Bullard spooked markets with his unusually dovish tone as he commented that, “the US is closer to a Japanese-style (deflationary) outcome today than any other time in recent history…” He added that although the need for further easing is unlikely, the FOMC must be prepared to face such a scenario. The comments spurned further concern that the US economy is slipping off of the rocky road to recovery, adding to the woes of the US currency. The USD/JPY slide began at 88.10 a little over 24 hours ago and culminated as mentioned at 86.25, eliciting comments from Japanese Finance Minister Noda who stated that he was watching the FX markets closely. Full text »

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New York Session – July 29, 2010 5:57 PM

July 29, 2010

The U.S Dollar opened this morning lower across the board based on a Moody’s report which stated “If U.S. government budget projections are realized in coming years, the country’s triple A rating would come under scrutiny”, and went on to say the United States appears to have “no plan” to deal with its fiscal outlook. Keep in mind less than 24 hours ago California Governor Schwarzenegger declared a state of emergency over the state’s finances (current budget is more than a month overdue and billion short) – Finally the spotlight has shined on some of the fiscal issues here in the U.S.
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U.S. Dollar Weakens in Currency Trading

July 29, 2010

Euro continues above 1.30 in forex trading

The U.S. dollar continues its weakness in currency trading on the FX market today. Indeed, the fundamentals are favoring the euro in forex trading as the Beige Book’s sluggish report contrasts with more robust economic growth in Europe.

Even though the euro has not been able to reach May’s 1.31 high against the U.S. dollar, it appears to be finding support at the 1.30 level. 

Other risk currencies are slowing as well. Even though the Aussie is higher against the U.S. dollar right now, the kiwi is showing signs of weakness, and there are thoughts that the Aussie could retreat.

But, for now, the U.S. dollar is showing mostly weakness in currency trading on the FX market. That is unlikely to change anytime really soon.

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Kiwi Lower in Forex Trading

July 29, 2010

Currency trading on the FX market

The kiwi is lower in forex trading today, thanks to dovish sentiment expressed by the Reserve Bank of New Zealand. RBNZ officials decided to raise the base rate by 25 basis points, putting the benchmark at 3%. 

However, this increase was accompanied by a statement that puts a damper on hopes for additional rate increases in the future. GFT’s Boris Schlossberg reports in FX360 on what this means for the Down Under currencies in forex trading:

With both the RBA and the RBNZ now likely to remain stationary well into the fall, as their respective economies absorb the latest round of monetary tightening, the Aussie and the kiwi may begin to underperform the other high beta FX currencies as speculative interest moves elsewhere.  Although both commdollars sport relatively high yields, the lack of any further rate hikes for the foreseeable future could cap the upside going forward.

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London Session – July 29, 2010 7:19 AM

July 29, 2010

Most indicators are suggesting that risk appetite rose further this morning.  European equities indices have performed well, EUR/USD is pushing higher as is AUD/USD and cable.  However, the trends exhibited by the JPY and gold have been less certain.  US data is patchy at best and this will likely ensure that optimism is kept in check.  The recent slow crawl upwards in EUR/JPY reflects improved risk appetite but the reluctance to break above 114.20 this morning reflects doubts as to direction.  Support at EUR/JPY113.00. Full text »

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Asia Session – July 29, 2010 3:48 AM

July 29, 2010

After a dramatic start with the New Zealand interest rate decision, markets settled down with the yen making slight gains on the day. The RBNZ overnight call rate decision got things rolling today with an expected hike of 0.25% to put the rate at a healthy 3.00%, however, the statements that followed put the Kiwi dollar into a tailspin. The RBNZ Governor Alan Bollard’s commentary that followed the rate announcement was more dovish than anticipated, as he questioned the “pace and extent of further rate increases….” Governor Bollard also talked down his currency by stating that its current appreciation is, “inconsistent with the softening in New Zealand’s economic outlook…” Needless to say, the NZD/USD dove from the 0.7280 level to lows just at the 0.7200 figure. The kiwi dollar has been trying to claw its way back to the 0.7280 mark ever since. AUD/NZD saw no such respite for the kiwi dollar as the pair launched from 1.2250 to 1.2370 in mere minutes and continued on to later highs nearer to 1.2390. The Aussie dollar made moderate 70 pip gains against the dollar as it tapped 0.8970 highs late in the session. Full text »

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New York Session – July 28, 2010 5:21 PM

July 28, 2010

Today’s U.S. June Durable Goods Orders fell 1% while economists expected a rise of 1%. The ex-Transportation (Core) number fell 0.6% from the prior month (Orders in May were also revised lower slightly from -0.6% to -0.8%). Later in the afternoon, U.S. July Fed Beige Book reported improvements in service industries, an increase in tourism, an expansion of manufacturing and overall labor market conditions progressed on the back of temporary hiring. Reports regarding retail sales generally indicated a continued rise in spending – with strong demand for everyday “necessities”, while sales of big-ticket items slowed (auto sales noted declines in recent weeks and activity in residential housing diminished after the expiration of the homebuyer tax credit). In closing, the Fed underscored their view that the economic recovery, while still moving forward, is progressing at a slower pace than earlier in the year.
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