New York Session – November 30, 2010 4:06 PM

November 30, 2010

The euro continued its descent and the dollar firmed amid elevated levels of risk aversion. EUR/USD dipped below the psychological 1.30 level currently trading around 1.2980 after plummeting from session highs of around 1.3150. Canadian GDP for September disappointed showing negative growth of -0.1% while the market was expecting +.1% (prior +0.3%). Quarterly annualized GDP for Q3 was also worse than forecast at +1.0% (cons. +1.5%, prior +2.3%). USD/CAD rallied as the Loonie weakened but was unable to break above its 200-day sma which capped the highs of around 1.0285. Full text » | Technorati | Stumble It!

How Quickly Do We Want the Yuan to Appreciate?

November 30, 2010

Perhaps slow yuan appreciation is the way to go

One of the perennial sticking points of policy between the U.S. and China is that of currency manipulation and yuan appreciation. Many agree that the yuan (also called the renminbi) is undervalued — by as much as 50% — against the U.S. dollar. 

As a result, many politicians in the U.S. call for a yuan that floats more freely, and that appreciates more quickly. While this sounds nice when stumping, it may not actually be the best course of action practically. After all, the world is used to the current world order. Changing it quickly, with a substantially stronger yuan, would throw the global economic balance into upheaval at a time when we can ill afford such an upheaval.

Another issue is what rapid yuan appreciation would do to costs for U.S. consumers. With a stronger renminbi, Chinese exporters would have to raise prices in order to keep up with costs. This would reduce purchasing power for those in the U.S. In an economy already struggling because consumers are not consuming, this could only make matters worse — especially since growth in real income is practically non-existent.

So, while it would be nice if the yuan were allowed to appreciate at a more reasonable pace, it is important to temper this desire with prudence. Perhaps China is right to want to make the transition very slowly.

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London Session – November 30, 2010 8:18 AM

November 30, 2010

The euro continued to slump amid ongoing concerns of euro zone contagion risk and despite positive economic data out of Germany. The Irish bailout did little to calm the markets as peripheral spreads continue to widen which was underscored by Spanish and Italian 10-year yield spreads over Germany reaching record wide levels today. European debt woes and renewed speculation that China will continue to tighten weighed on risk appetite and led investors to seek safety. The Japanese yen, Swiss franc, and U.S. dollar were beneficiaries as investors shunned risk in search of safe havens. Full text » | Technorati | Stumble It!

Euro Drops in Forex Trading

November 30, 2010

Weakness likely for euro forex trading forecast

Weakness continues to be the likely euro forex trading forecast as sovereign debt worries retain their place in investors’ minds.

Focus continues to be on the euro zone, and euro zone countries with high amounts of sovereign debt. In Spain, the bond yields are rising again, and other countries are similarly afflicted. This is creating a difficult situation for the euro in forex trading.

All of this concerns is compounded by worries about Germany’s economy. The German economy is quite important in the euro zone, and with economic marks being missed, there are concerns about whether or not the euro zone can see enough growth to overcome the current worries.

With all the uncertainty, it is little surprise that the euro is falling in forex trading to the U.S. dollar. And, unless the situation improves markedly, euro weakness is likely to persist.

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Asia Session – November 30, 2010 1:50 AM

November 30, 2010

Risk aversion was the flavor of the day today in Asia with both the US dollar and the Japanese yen benefitting from sagging equity markets across the continent. With renewed fears of a rate hike in China hitting fever pitch today, Chinese stocks led the path lower with the Shanghai Composite Index lower by over 3.0%. The Euro took the brunt of the move as it saw early 1.3150 highs melt to levels under 1.3080 on the day while the GBP/USD saw over two month lows of 1.5523 print. Against the yen, the Euro hit a low not seen since September 15th, the day the Bank of Japan intervened in the currency markets. The EUR/JPY sunk from 110.65 to a 109.97 low on the day, forging a path for a 70 pip drop to 80.65 in the AUD/JPY and a 60 pip drop in the GBP/JPY to lows near 130.60. The USD/JPY saw a decline from 84.30 to 84.00. Full text » | Technorati | Stumble It!

New York Session – November 29, 2010 4:05 PM

November 29, 2010

Despite a defined bailout package to aid Ireland and its troubled banks, risk sentiment tumbled resulting in a flight to safety. The dollar gained as a safe haven amid continued Euro zone debt fears. The Irish package which was released today totaled 85 billion euro of which 45 billion came from the EU, 22.5 billion from the IMF, and 17.5 billion euro from Ireland’s cash reserves and national pension fund. Additionally, Ireland will pay an average of 5.8% interest (higher than Greece’s 5%). The euro weakened substantially as EUR/USD hit 2-month lows of around 1.3065. It is currently trading around 1.3120 nearby the 200-day simple moving average which comes in around 1.3130. Full text » | Technorati | Stumble It!

London Session – November 29, 2010 6:34 AM

November 29, 2010

Another historic weekend for the Eurozone: Full text » | Technorati | Stumble It!

Euro Lower in Forex Trading

November 29, 2010

Currency trading on the FX market

The euro is moving lower in forex trading on the currency market, heading down after the Irish bailout. Even though European governments outlined plans for future bailouts at the time, there are still mixed feelings about the whole bailout issue throughout the euro zone.

For now, the U.S. dollar is mostly higher in currency trading on the FX market, while the euro struggles. Concerns about euro zone growth in the coming months is quite high, as it is obvious that European governments will have to curb their spending in order to rein in sovereign debt.

As a result, the euro is losing ground. Risk appetite in general appears to be weak today as the U.S. dollar gains in currency trading on the FX market.

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Economic Indicators Turn Postive for the U.S.

November 29, 2010

U.S. dollar higher in forex trading

Economic indicators are turning positive for the U.S., with hopes for another increase in nonfarm payrolls. Additionally, there has been an increase in consumer confidence, and that is helping matters.

For the most part, a cautious optimism has come to the U.S. market, helped along by holiday sales from the Black Friday weekend. The U.S. dollar is higher in forex trading, but that may just be due to weakness in Europe, and continued weakness shown by gold prices.

For now, though, it does appear as though there is some hope for the U.S. economy, and that the U.S. economy may be finding its footing.

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Asia Session – November 29, 2010 1:48 AM

November 29, 2010

The new week opened with optimism over the finalization of a joint EU/IMF bailout package for Ireland that totaled 85 Billion Euros ($113 Billion), and helped gap risk currencies higher on the open. The breakdown includes 45 billion Euros from the EU, 22.5 billion Euros from the IMF and a final 17.5 billion from Ireland’s own coffers. The news shot the EUR/USD to an open near 1.3290 after the pair closed at 1.3240 on Friday amidst concern for Irish sovereign debt troubles. Risk followed the lead and it seemed that the European Union had done its job quelling market woes of the instability of the Irish banking system. The back patting by the EU didn’t last long however as investors once again looked past Ireland and renewed their focus on the next potential pages of the bailout book, featuring Portugal and Spain. The realization that a bailout package for Spain and Portugal would probably dwarf the Irish bailout along with the backdrop of continued tensions in the Korean Peninsula helped ensure that the levels made on the opening optimism were session highs. Full text » | Technorati | Stumble It!

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