Tuesday May 18, 2004 - 09:46:06 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Net dollar risks increase
Daily Market analysis 18/05/04
Key factors today:
Global risk aversion and equity market developments will remain critical in the absence of major US economic data.
Markets will remain dominated by risk aversion and a further reduction in high-risk trades. The immediate implications should be finely balanced, although longer-term dollar risks will increase. There will also be some speculation that the Fed will delay a tightening due to growth concerns. Overall, the Euro is likely to have a firmer bias with a 1.2120 medium-term target.
There have been further concerns over the Iraq situation, especially with President Bush's approval ratings continuing to decline, and the reports of a shell containing the sarin nerve gas are unlikely to have a sustained positive impact. Risk aversion remains high and this is tending to offer near-term support to the Euro and the dollar. The closing of carry trades is helping to underpin the US currency while the interest in safe European currencies is helping to support the Euro. If there is a sustained increase in risk aversion, there will be a greater risk to the dollar, primarily due to its wide current account deficit.
The latest figures on capital flows reported net inflows of US$78.6bn in March after US$83.3bn in February. The figures are historic and only of limited important, but there were net inflows of US$32bn from the Bank of Japan and there were net outflows from the US stock market. The Bank of Japan did not intervene in April and there will, therefore, be a greater dependence on private inflows. In this context, the weak equity flows will be troubling for the US currency's prospects.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."