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It’s All About the (ECB Interest Rate) Numbers
Posted on April 30, 2008 in ()It’s All About the (ECB Interest Rate) Numbers
Now that the world has had a full day to sample and digest the G-7 strong Dollar rhetoric it seems that talk is cheap…and not particularly satisfying. At the end of the day interest rate differentials still determine, or are the single most powerful determinate of global Forex rates. So those who are hoping…and trying to will the USD to strengthen are destined to be disappointed. While fundamentals in the US are still weak and the ECB is unmoved on cutting interest rates, EUR/USD is likely to test new all-time highs within the immediate future. The ECB is handcuffed by the threat of inflation and several ECB Officials have indicated that "there is no room for EuroZone rate cuts this year." In a sign that frustration may be taking over in the EuroZone, ECB Officials have begun to claim that Euro is unfairly carrying the burden of dollar depreciation, perhaps suggesting that Asian currencies should/could appreciate further. This is a clear shot at Yen, but again talk is cheap and the interest rate differential…and more importantly interest rate volatility is clearly leading the market sentiment.
In another change in the ECB stance indicated by the G-7 communiqué, German Chancellor Merkel said on Monday that Euro strength against the dollar was "difficult for exporters." There is no doubt that Euro strength is an uncomfortable and ironic consequence of EuroZone economic stability. Until the US economy stabilizes or the ECB eases credit with the rest of the G-7, Euro is likely to continue to appreciate.China yuan central parity rate set at 7.0002 to dollar vs 6.9898
Posted on April 30, 2008 in ()China yuan central parity rate set at 7.0002 to dollar vs 6.9898
The central bank has set the yuan central parity rate at 7.0002 to the dollar, according to the China Foreign Exchange Trading System.
The rate, published on the official Chinamoney website (www.chinamoney.com.cn), compares with the midpoint of 6.9898 set the previous trading day.
The People's Bank of China (PBoC) started setting a daily central parity rate on Jan 4, 2006.
On July 21, 2005, China freed the yuan from its long-standing peg to the dollar in favor of a trade-weighted basket of currencies, and allowed the local unit to appreciate by 2.1 pct. The PBoC allows a trading band of 0.5 pct on either side of the central parity rate.Forex - U.S. dollar slightly higher late morning in Sydney ahead of Fed decision
Posted on April 30, 2008 in ()
Forex - U.S. dollar slightly higher late morning in Sydney ahead of Fed decision
The U.S. dollar traded in a narrow range against the euro and the yen in afternoon trade in Asia on Wednesday, with investors preferring to stay on the sidelines ahead of the Federal Open Market Committee (FOMC) meeting.
The FOMC will announce the outcome of its two-day meet later today and investors are anxious to see if the Federal Reserve policymakers will signal the end of the interest rate cutting cycle in the United States. The Fed is widely anticipated to lower its key rates by a quarter of a percentage point to 2 percent, the smallest cut this year.
Before the FOMC's statement, which will likely give investors a clue on where rates are headed, the U.S. will release first-quarter economic data which may influence the outcome of the Fed's meeting during the day.
"We have a Fed decision tonight and it's unlikely that investors will be adding to their risks prior to the announcement," said David Mann, a currency strategist at Standard Chartered Bank.
He said the release of the economic data "will be very important for the dollar and Fed rate expectations".
At 1:00 p.m. (0500 GMT), the dollar was trading at 103.97 yen from 104.08 yen in Sydney this morning. The euro was quoted at $1.5582 from $1.5569.
While most analysts and economists expect the Fed to hold interest rates for a while after tonight's expected rate cut to ease inflationary pressures, there are others who remain skeptical.
"I don't think at this moment investors should be bullish about the U.S. economy," said Mark Wan, chief analyst at Hang Seng Investment Services Ltd. "And I don't think the FOMC will hold off rate cuts in the foreseeable future."
Standard Chartered's Mann agrees.
"It is unlikely that the Fed will signal that it's the end of the easing cycle. That would tie their hands and limit their policy action onwards," said Mann.
The Fed will likely cut rates by 25 basis points more in June and another quarter point in August, he said.
Bank of America's Tomoko Fujii shared Mann's views that the Fed may slash its key rates by another 50 basis points, a quarter point each in June and August.
"All this talk about U.S. rates bottoming out are premature," said Fujii in an earlier interview. "It is too early to judge that the Fed easing cycle is ending -- we maintain our view that there will be two more rate cuts after this week."
Since the Fed began cutting rates in September, it has lowered its rates by a cumulative 300 basis points in an effort to ease the credit crisis that stemmed from unpaid housing loans extended to borrowers with junk or no credit ratings.
"The FOMC may well use this meeting to signal that an end to the easing cycle is nearing, given the substantial easing in policy over the past six months," said Spiros Papadopoulos, head of currency strategy at NAB Capital Markets.
Currency traders are betting on an 80 percent chance that the Fed will lower rates by a quarter point and expect that it would be the last rate cut, said Papadopoulos.
Meanwhile, the Bank of Japan earlier today voted to keep its key rate unchanged at 0.5 percent, the lowest among developed countries.
Hong Kong 1:00 p.m. (0500 GMT)
U.S. dollar
yen 103.97
Swiss franc 1.0364
Euro
U.S. dollar 1.5582
yen 161.92
Swiss franc 1.6150
pound 0.7917
Pound
U.S. dollar 1.9680
yen 204.54
Swiss franc 2.0391
Australian dollar
U.S. dollar 0.9345
pound 0.4748
yen 97.10
Posted on April 30, 2008 in ()
Forex - U.S. dollar slightly higher late morning in Sydney ahead of Fed decision
The U.S. dollar traded in a narrow range against the euro and the yen in afternoon trade in Asia on Wednesday, with investors preferring to stay on the sidelines ahead of the Federal Open Market Committee (FOMC) meeting.
The FOMC will announce the outcome of its two-day meet later today and investors are anxious to see if the Federal Reserve policymakers will signal the end of the interest rate cutting cycle in the United States. The Fed is widely anticipated to lower its key rates by a quarter of a percentage point to 2 percent, the smallest cut this year.
Before the FOMC's statement, which will likely give investors a clue on where rates are headed, the U.S. will release first-quarter economic data which may influence the outcome of the Fed's meeting during the day.
"We have a Fed decision tonight and it's unlikely that investors will be adding to their risks prior to the announcement," said David Mann, a currency strategist at Standard Chartered Bank.
He said the release of the economic data "will be very important for the dollar and Fed rate expectations".
At 1:00 p.m. (0500 GMT), the dollar was trading at 103.97 yen from 104.08 yen in Sydney this morning. The euro was quoted at $1.5582 from $1.5569.
While most analysts and economists expect the Fed to hold interest rates for a while after tonight's expected rate cut to ease inflationary pressures, there are others who remain skeptical.
"I don't think at this moment investors should be bullish about the U.S. economy," said Mark Wan, chief analyst at Hang Seng Investment Services Ltd. "And I don't think the FOMC will hold off rate cuts in the foreseeable future."
Standard Chartered's Mann agrees.
"It is unlikely that the Fed will signal that it's the end of the easing cycle. That would tie their hands and limit their policy action onwards," said Mann.
The Fed will likely cut rates by 25 basis points more in June and another quarter point in August, he said.
Bank of America's Tomoko Fujii shared Mann's views that the Fed may slash its key rates by another 50 basis points, a quarter point each in June and August.
"All this talk about U.S. rates bottoming out are premature," said Fujii in an earlier interview. "It is too early to judge that the Fed easing cycle is ending -- we maintain our view that there will be two more rate cuts after this week."
Since the Fed began cutting rates in September, it has lowered its rates by a cumulative 300 basis points in an effort to ease the credit crisis that stemmed from unpaid housing loans extended to borrowers with junk or no credit ratings.
"The FOMC may well use this meeting to signal that an end to the easing cycle is nearing, given the substantial easing in policy over the past six months," said Spiros Papadopoulos, head of currency strategy at NAB Capital Markets.
Currency traders are betting on an 80 percent chance that the Fed will lower rates by a quarter point and expect that it would be the last rate cut, said Papadopoulos.
Meanwhile, the Bank of Japan earlier today voted to keep its key rate unchanged at 0.5 percent, the lowest among developed countries.
Hong Kong 1:00 p.m. (0500 GMT)
U.S. dollar
yen 103.97
Swiss franc 1.0364
Euro
U.S. dollar 1.5582
yen 161.92
Swiss franc 1.6150
pound 0.7917
Pound
U.S. dollar 1.9680
yen 204.54
Swiss franc 2.0391
Australian dollar
U.S. dollar 0.9345
pound 0.4748
yen 97.10
Has Dollar Turned The Corner?
Posted on April 30, 2008 in ()Has Dollar Turned The Corner?
After relentless selling for the past month which culminated in a spike top of 1.5900 at the start of trade this week, the EURUSD dollar finally turned the corner dropping below 1.5500 by Good Friday. As we wrote in our daily, “The market appears at a standstill as EURUSD consolidates its gain in the 1.5300-1.5500 area and traders wait for the next theme to develop. The collapse of Bear Stearns has left the market wary, but with no additional news of serious trouble in the US financial system, dollar shorts have run out of fresh reasons to sell the greenback. Meanwhile evidence of a potential slowdown in EZ economy is starting to mount, raising concerns that ECB may have to shift its hawkish posture relatively soon”.
Has Dollar Turned The Corner?
After
relentless selling for the past month which culminated in a spike top
of 1.5900 at the start of trade this week, the EURUSD dollar finally
turned the corner dropping below 1.5500 by Good Friday. As we wrote in
our daily, “The market appears at a standstill as EURUSD consolidates
its gain in the 1.5300-1.5500 area and traders wait for the next theme
to develop. The collapse of Bear Stearns has left the market wary, but
with no additional news of serious trouble in the US financial system,
dollar shorts have run out of fresh reasons to sell the greenback.
Meanwhile evidence of a potential slowdown in EZ economy is starting to
mount, raising concerns that ECB may have to shift its hawkish posture
relatively soon”.