Australian Dollar Falls, China to Blame

The Australian dollar fell as signs of economic slowdown in China spooked Forex traders, causing concerns that demand for assets of the South Pacific nations will decline. The currency closed higher against the euro.

China’s economic growth slowed, reducing attractiveness of growth-related assets. China is a major trading partner of many commodity-exporting countries, Australia among them.

Sue Trinh, a senior foreign-exchange strategist at Royal Bank of Canada, commented on the market reaction to the slowdown of the Chinese economy:

    The market is still surprised,. We’re going to be watching at any increase in speculation of monetary policy easing by the Chinese authorities, which may at least help to prevent a deeper retracement in the Aussie.

News from the United States and Europe wasn’t good either, leading to a drop against the greenback and the yen, but also resulting in an advance versus the euro. The Aussie ended the week relatively good as fundamentals in Australia were largely favorable, mitigating the negative impact of risk aversion sentiment.

AUD/USD was down from 1.0437 to 1.0371 and AUD/JPY fell from 84.42 to 83.91. At the same time, EUR/AUD closed at 1.2604, following the jump from the opening price of 1.2629 to the daily maximum of 1.2684.

Second Week of Gains for Yen

The Japanese yen gained for the second week as risk aversion sentiment prevailed on the Forex market, while the Bank of Japan refrained from easing its monetary policy despite its promises.
The BoJ left its interest rates and asset-purchase program unchanged for the second time at its meeting on April 10. Such decision left frustrated those traders who expected the Bank to intervene. Still the central bank signaled that it’s going to ”pursue powerful monetary easing”, thus limiting the gains of the yen.
News from other parts of the world was also supportive for the Japanese currency. Rising unemployment claims in the United States, growing borrowing costs in Spain and slowing China’s economy made traders to buy safer currency of Japan, avoiding risk.
The yen ended flat on Monday as most markets were closed, though fluctuations were noticeable. The currency fell on Tuesday as traders digested the report that that employment growth in the USA was much slower than anticipated. The yen was falling next two days as investors demonstrated some risk appetite, but China’s growth of GDP that was slower than expected returned demand for Japan’s currency and it jumped on Friday.
USD/JPY fell from 81.51 to 80.90 this week, touching 80.56, the lowest rate since February 29. EUR/JPY was down from 106.76 to 105.81, while the weekly low of 105.44 was the lowest since February 22. GBP/JPY declined from 129.45 to 128.20, reaching during the week 127.86 — the lowest since March 8.

China Gives Yuan a Little More Room to Float

For years, other countries have been asking China to let the yuan, also called then renminbi, to float more freely on the currency market. It appears that China is doing that now, with an announcement that the yuan will be allowed to float more freely against the US dollar.

China announced that it will allow the yuan to float a little more freely against the US dollar, allowing the currency to move one per cent to either side of the US dollar currency peg. The yuan will not be a truly free floating currency as a result of the new policy, but it will have a little more flexibility.

For years, Western countries, especially the United States, have charged that the Chinese undervalue their currency, keeping it artificially low against the US dollar. This allows for an edge in exports, as a weaker yuan makes goods cheaper to purchase by consumers in other countries. Many expect that if Chinese policymakers were to ever let the yuan freely float, it would appreciate quite quickly.

This appears to be something of a step in a direction for more flexibility. Chinese leaders can maintain the dollar peg, but slowly ease the yuan into the currency market. Right now, the dollar/yuan is at 6.3149.

US Dollar Heads Higher on Spanish Concerns

Once again, the US dollar index is heading higher, gaining as concerns about what’s happening in the eurozone take precedence over much else. Greenback is also getting help from the fact that the US economy seems ready to recover better than the eurozone economy right now.

US dollar is higher against European currencies today, gaining against the euro and the pound. The economic situation in the United States is showing some improvement, with March retail sales gaining by 0.8% since February — and up more than 6% since March 2011. The news is helping the US dollar as concerns about the eurozone economy (which some think might be in recession or heading that way) continue to hold the 17-nation currency down.

Concerns about Spain continue to weigh on the eurozone, and there are still issues regarding the British economy, so the euro and the pound are both losing ground to the dollar. And, interestingly, just after the Chinese introduced a wider trading band for the yuan against the US dollar, the greenback ended higher against the yuan. It’s an interesting day right now, with the greenback gaining against other majors, except the yen, which is higher against the dollar.

At 14:36 GMT EUR/USD is lower at 1.3049, down from the open at 1.3064. GBP/USD is down to 1.5845 from the open at 1.5853. USD/JPY is down to 80.4145 from the open at 80.8495.

Euro Lower Against Many Counterparts

Euro is lower against many of its counterparts today, dropping as concerns about the European debt situation continue to dominate the news. Spain is expected to auction off bonds today, and there are concerns about climbing yields. Additionally, there are expectations of a drop in investor confidence in Germany.

Concerns about the eurozone are dominating news today as Forex traders consider that the sovereign debt situation might be contagious. Worries about the spread of the crisis are keeping the euro lower against most of its major counterparts. It’s also not helping that, in Germany, investor confidence appears to be waning.

For now, the ECB isn’t interested in bailing out Spain. The Spanish Prime Minster, Mariano Rajoy, says that Spain will employ large cuts, but it might not be enough. Besides, large cuts from the eurozone’s fourth-largest economy could slow eurozone economic growth as a whole, and there are already recession fears.

It is little surprise that the eurozone is struggling, and that the euro is struggling as well. The 17-nation currency is down against the US dollar and the UK pound, as well as struggling against many other currencies today.

At 13:27 GMT EUR/USD is lower at 1.3131, down from the open at 1.3141. EUR/GBP is down to 0.8237 from the open at 0.8266. EUR/CHF is lower at 1.2016, down from the open at 1.2018.

Bank of Canada Comments Send Loonie Higher

Right now, the Canadian dollar is seeing gains against nearly all of its major counterparts as the Bank of Canada comes out sounding a bit hawkish. Loonie is finding support in general risk appetite as well, and receiving some help from higher oil prices.

Everything seems to be going right for the Canadian dollar today. The BOC came out and said that putting a stop to stimulus measures might be a priority, and many are taking that to mean that an interest rate hike is on the way. In a low-yield environment, any currency connected to an interest rate hike is likely to be favored in the currency market.

On top of the seemingly hawkish comments from the Bank of Canada, there are also other forms of support for the loonie in forex trading. Risk appetite in general is on the rise, as demand in the Spanish bond auction allays some economic fears. The International Monetary Fund has improved its forecast for the global economy, including a boost for the US economy, which is a major trading partner for Canada. Higher oil prices are also helping the loonie today, since oil is a major export for Canada.

At 14:24 GMT USD/CAD is down to 0.9875 from the open at 0.9993. GBP/CAD is lower at 1.5739, down from the 1.5890. EUR/CAD is down to 1.2966 fromt he open at 1.3120.

US Dollar Index Gains as Traders Consider Consolidation

Yesterday’s buoyant tone and risk appetite have receded, leaving the US dollar to log gains against some currencies right now. The dollar index is heading higher, as the greenback gains against some of its major counterparts, especially the euro and the yen.

Yesterday, better news out of Europe, combined with an enthusiasm for stocks, led to a lower US dollar. The dollar index dropped below 80 as many traders looked for better yields. Today, though, many have taken a bit of a step back. Stock traders appear to be in consolidation mode after yesterday’s spectacular rally, and there is once again some focus on the eurozone and its problems.

Right now, though, a higher US dollar is putting downward pressure on commodities. Gold prices are lower today, along with oil prices. Greenback is showing strength against the euro and franc, as well as against the yen right now, which is boosting the dollar index performance. This is significant, as the US dollar is modestly lower against the pound today, and mostly flat against the Canadian dollar.

This mixed performance by the US dollar isn’t stopping the dollar index from rising, though. The gains made by the dollar against the euro and the yen are significant enough to keep the dollar index in positive territory.

At 13:08 GMT the dollar index is at 79.827, up from the open at 79.570. EUR/USD is down to 1.3072 from the open at 1.3126. USD/JPY is up to 81.3515 from the open at 80.8430. GBP/USD is up to 1.5977 from the open at 1.5926. USD/CHF is up to 0.9199 from the open at 0.9152. USD/CAD is mostly flat at 0.9902 from the open at 0.9903.

Japanese Yen Falls on Rumors of Further Economic Stimulus

Japanese yen is heading lower today, dropping against other majors as rumors swirl regarding the possibility of further economic stimulus. The idea that more easing for the yen could be coming is weakening the currency against the dollar and the euro.

Kiyohiko Nishimura, a deputy governor at the Bank of Japan, spoke recently, insisting that the Japanese economy needs more help to recover. He also cited global economic uncertainties that should prompt Japanese policymakers to take action. Nishimura’s comments, coming just nine days before the next Bank of Japan policy meeting.
The tenor of Nishimura’s comments are leading many to believe that the BOJ will announce more quantitative easing — and perhaps even intervene directly in the currency market to keep the yen weak. Japanese leaders prefer a weak yen to a strong one, since a weaker yen leads to an edge when it comes to exports. A weaker currency can help economic growth, and that is what the BOJ is looking for right now.
It looks as though the BOJ is ready to take action, and Forex traders are rushing to re-position, selling the yen and getting ready for another drop, with the dollar and the pound especially gaining against the Japanese currency.
At 14:23 GMT, USD/JPY is up to 81.3035 from the open at 80.8430. EUR/JPY is also higher at 106.4250, up from the open at 106.1000. GBP/JPY is up to 130.0790 from the open at 128.7450.

Euro Weakens as Questions Persist

Euro is weakening today against the US dollar and the UK pound as questions about the economic viability of the eurozone persist. Even though it’s clear that eurozone countries can still sell bonds, investors are asking for higher yields. The continued economic struggle in the eurozone is weighing on the euro.

Economic forecasts for the eurozone have the region slowing this year, and some think that a recession could already be underway. With so many countries enforcing austerity measures, there isn’t the spending to spur economic growth. Bond auctions are seeing success, but yields are rising. Spanish bond yields are higher, and even French bond yields are higher on the expectation that sometime later this year or early next year France’s rating will be downgraded.

As a result, the euro is dropping on the Forex market. Euro is down against the US dollar as risk aversion and a better situation in the United States both weigh on the 17-nation currency. Euro is also down against the UK pound. The Bank of England has indicated that need for stimulus might be past, and that is boosting the British currency. Euro has even pared its recent gains against the Japanese yen.

At 13:26 GMT EUR/USD is down to 1.3105 from the open at 1.3123. EUR/GBP is lower at 0.8170, down from the open at 0.8191. EUR/JPY is higher at 106.8045, up from the open at 106.6300, but off the session high of 107.3750.

UK Pound Gains as BOE Prepares to Wind Down Stimulus

UK pound is seeing gains again today, heading to highs not seen for 19 months against the euro. Sterling is also up against the US dollar as Forex traders look for signs that the BOE is ready to raise rates. With no more quantitative easing in the immediate future, pound is getting a boost, even though the general market tenor is one of risk aversion.

The Bank of England recently released the minutes of its last Monetary Policy Committee meeting, and they show that the BOE is ready to roll back its stimulus efforts. Adam Posen, who has been asking for more stimulus in meetings, noticeably didn’t in the last meeting. Additionally, it appears that the BOE policymakers discussed inflation, and concerns about keeping it under control.

While this doesn’t mean that the next BOE meeting will result in an interest rate hike, it does indicate that quantitative easing is no longer deemed necessary by monetary leaders in Great Britain. The result is helping the UK pound on the currency market, since it seems to indicate that at some point a rate hike will be in order, and that further efforts to weaken the sterling in the name of economic stimulus aren’t on the table.

At 14:38 GMT EUR/GBP is down to 0.8186 from the open at 0.8191. GBP/uSD is higher at 1.6054, up from the open at 1.6023.