Monday September 28, 2009 - 19:37:57 GMT
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Forex Market Commentary and Analysis (28 September 2009)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4560
level and was capped around the $1.4720 level.
World Bank President Zoellick reported the U.S. dollar could lose its
status as the dominant reserve currency but noted it will remain a ‚Äúmajor
currency,‚ÄĚ adding the euro is a ‚Äúrespectable alternative if the dollar is
weak.‚ÄĚ European Central Bank President
Trichet optimistically reported ‚ÄúThere has been no materialization of
the deflationary risk in Europe.‚ÄĚ Trichet also voiced his objection to a Tobin
tax on speculative financial transactions.
Speaking about the eurozone economy, Trichet added ‚ÄúThe governing
council of the ECB considers that it would be premature to declare the crisis
over. Now is not the time to exit.
However at some point in time exit strategies will have to be
implemented.‚ÄĚ Trichet remarked that the
current level of interest rates in the eurozone economy is ‚Äúappropriate‚ÄĚ and said
it is ‚Äúextremely important‚ÄĚ to have a strong dollar. Data released in the eurozone today saw German
September consumer price inflation off 0.4% m/m and off 0.3% y/y, the latest
data that suggest the risk of inflation there is minimal. Some economists are
predicting the German inflation rate will remain below 2% in 2010. Other data saw the EMU-16 August composite index
of leading indicators improve 1.8%. In U.S. news, traders will pay close
attention to Friday‚Äôs September non-farm payrolls report. A reported released by the U.S. government
today reported the U.S. Treasury raised US$ 1.202 trillion in new cash this
year by selling U.S. Treasury securities and that the Federal Reserve has
purchased about 24.1% of the new securities.
Fed Governor Warsh on Friday suggested the Fed may need to be more
aggressive than previously thought in preventing inflation. Euro
bids are cited around the US$ 1.3900 figure.
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•88.25 level and was capped around the ¬•89.65 level.
The pair ceded some significant intraday
gains that were earned as traders continued to speculate Japanese government
officials will do little to slow the runaway yen. Finance minister Fujii verbally intervened
twice overnight saying ‚ÄúThe
temporary movements (in the yen against the dollar) at present are a little
one-sided. Prime Minister Hatoyama said
that it's desirable if foreign exchange rates are stable, and I feel absolutely
the same.‚ÄĚ Fujii made it clear that
although he does not favour much intervention, he does not want the yen to
become a one-way bet, either. Data to be
released on 1 October include the quarterly Bank of Japan tankan survey of
The Nikkei 225 stock index lost 2.50% to close at
¬•10,009.52. U.S. dollar offers are cited
around the ¬•94.75 level. The euro moved lower vis-√†-vis the yen
as the single currency tested bids around the ¬•129.80 level and was capped around
the ¬•131.80 level. The British pound moved lower vis-√†-vis the yen as sterling tested bids
around the ¬•139.70 level while the Swiss
franc moved lower vis-√†-vis the yen and tested bids around the ¬•85.90 level.
In Chinese news, the U.S. dollar lost
ground vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8220 in the
over-the-counter market, down from CNY 6.8235.
People‚Äôs Bank of China
Deputy Governor Hu last week reported G20 nations should consider establishing
an international wealth fund to invest a portion of members‚Äô current account
surpluses. Chinese financial markets
will be closed from 1 October through 8 October for the National Day‚Äôs holiday. Some banks are predicting China will
register consumer price inflation growth in November.
The British pound extended recent losses vis-√†-vis the U.S. dollar today
as cable tested bids around the US$ 1.5765 level and was capped around the $1.5975
level. Bank of England Chief Economist Dale reported the U.K. economy has
stabilized but added ‚Äúit‚Äôll be a long haul‚ÄĚ to a full economic recovery. There is speculation that BoE may be getting ready
to reduce the overnight deposit rate to a negative percentage so that lenders are
not incentivized to stash cash overnight at the central bank. This is a policy action that Sweden‚Äôs Riksbank
enacted recently. Cable bids are cited around the US$ 1.5720 level.
euro moved lower vis-√†-vis the British pound as the single currency tested bids
around the ‚ā§0.9190 level and was capped around the ‚ā§0.9295 level.
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