» 2007 » July

Concerns that turmoil in the US sub-prime mortgage sector have spilled over into the wider credit markets prompted traders to buy Yen last week and earlier on Monday, closing carry trades. Along with credit worries and US economic data, currency trading may be impacted by pending interest rate decisions from the European Central Bank and Bank of England. The ECB and BoE are expected to keep rates on hold at 4 percent and 5.75 percent, respectively, this week, although both are still seen rising rates at least once more this year. In the United States, interest rate futures are building on last week’s gains and driving down the implied fed funds rate. Futures have fully priced in a 0.25% rate cut from the Federal Reserve by the end of 2007 and at least one more by June 2008.

Source : ACM

The U.S. dollar rebounded sharply on Friday, after a fall in the previous sessions, as trouble in the US credit markets led investors to repatriate funds from overseas. Worries about ongoing problems in the U.S. sub-prime mortgage and corporate bond markets have led investors to shun bets in riskier assets such as foreign stocks this week, helping the dollar recover more than two cents from record lows against the euro as money flows back into the United States. Meanwhile the flight from risk has led some traders to cut their exposure to carry trades, or purchases of high yielding currencies such as the New Zealand dollar, financed by selling low-interest rate currencies like the yen or Swiss franc. The futures market is indicating an 82% chance the Fed will ease monetary policy by year-end, up from 76 percent overnight. Earlier last week, Markets were pricing in just a 50% chance of a quarter point rate cut by year end.

Source : ACM

The yen surged on Thursday, climbing to a three-month high against the dollar, as investors spooked by growing problems in credit markets fled risky assets financed by borrowing in the low-yielding Japanese currency. The British Pound tumbled from it’s 26-year high, marking the first weekly decline against the greenback in six weeks.

Source : ACM

The dollar fell to a record low against the euro and dropped versus the yen on speculation losses on debt backed by U.S. sub-prime mortgages will spread. Signs a housing slump will deepen reinforced expectations the Federal Reserve will keep interest rates unchanged this year, adding to the dollar’s decline. Traders raised bets on further ECB rate increases after a report showed Europe’s economy grew faster than previously estimated in the first quarter. Europe’s economy is set to grow more than the U.S. for the first time since 2001 with business and consumer confidence near a six-year high. ECB President Jean-Claude Trichet yesterday said the inflation outlook “remains subject to upside risks”. Bank of Japan Governor Toshihiko Fukui told reporters today weak economic growth won’t determine the outcome of a rate-setting meeting next month.

source: 13

The Dollar was mostly flat on Monday in a quiet session but expectations that the Federal Reserve will keep interest rates unchanged this year while other Central Banks tighten monetary policy kept sentiment negative. High oil prices and steady economic growth are expected to keep European Central Bank on a tightening path, although the Bank of Japan will likely lag all other Group of Seven central banks bar the Fed, even if it does hike rates from 0.5% some time this year. Analysts said “the Dollar remains biased to the downside as a result of the outlook that US interest rates will remain steady for the remainder of this year, which contrasts with rate hike expectations in Canada, the Euro-zone, UK and Japan”.

source: 13

The dollar slid to a 26-year low against sterling on Wednesday due to worries about the U.S. sub-prime mortgage sector and after British inflation data boosted expectations for higher interest rates there. The data bolstered expectations that interest rates in Britain could climb beyond 6 percent by the end of the year. The dollar seems to be on shaky ground due to lingering concerns that troubles in the U.S. sub-prime mortgage sector might have an adverse impact on the broader economy. Bear Stearns Cos. Inc. said in a letter to investors on Tuesday that two of its hedge funds that bet heavily on risky sub-prime loans now have

source: 13

The dollar was little changed against the euro on Thursday, trading just above an all-time low, as concerns about the U.S. housing market and its impact on consumers continued to sour investors on the greenback.

source: 13

The dollar rose sharply on Wednesday, posting its biggest daily gain in a year against a basket of major currencies in a technical rebound after hitting fresh record lows against the euro. Investors shrugged off an unexpectedly soft report on U.S. existing home sales, and instead bought back the Dollar after its sharp fall this week driven by growing worries about weakness in the US sub-prime mortgage market. The yen also rose across the board, as trouble in the credit markets led some investors to sell higher yielding currencies and buy Yen to unwind bets made by borrowing cheap in the Japanese currency. Looking ahead, the market’s main focus on Thursday will be new home sales for the month of June. The first reading of US Gross Domestic Product for the second quarter will follow on Friday.

source: 13

The Yen was little changed near an all-time low against the Euro and Dollar early this morning, as investors showed muted reaction after the Bank of Japan held interest rates unchanged at 0.5% as expected but did so on a split vote. At the BoJ policy meeting, only one of the nine boards members voted to lift rates, compared with market expectations that up to three members might vote for a hike. Moody’s Investors Service cut ratings on $5.2B of bonds backed by US sub-prime mortgages and Standard & Poor’s threatened to do the same, prompting the biggest jump in the GbpUsd in three months. The slowdown in the US housing market is expected to keep the Federal Reserve on hold.

source: 13

The dollar fell to multiyear lows against higher-yielding currencies on Monday and remained near a record low versus the euro as investors braced for data expected to show declines in home construction and inflation. Traders await for consumer price and housing construction data and semi-annual testimony from Fed Chairman Ben Bernanke due on Wednesday for their next cue. Strong inflation data pushed the New Zealand dollar to its highest level against the Dollar since being floated in 1985, and the Australian dollar hit an 18-year peak. Interest rates in New Zealand, Australia and the UK offer investors higher returns than benchmark U.S. rates, which most market players expect to stay at 5.25 percent this year.

source: 13