Dollar, Euro High Vs Yen

May 18, 2009 by Prakash Dhawan · Leave a Comment
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The euro and dollar gained to session highs against the yen Monday as risk appetite continued to gain steam in currency markets with stronger stocks. Higher stocks encourage traders’ appetite for risk; declines in equities lead foreign exchange traders back to the major funding currencies, dollar and yen. The euro advanced to Y129.85 and the dollar rose to Y96.14, significant turns after hitting multi-week lows overnight. Stocks will continue to be a key indicator for currencies this week given a data-light schedule, according to strategists. Earlier, euro, Australian dollar and U.K. pound also hit intraday highs against the U.S. unit.

Still, analysts add that the moves in foreign exchange are within recent ranges and are subject to continued swings in equities markets. Daragh Maher, deputy head of foreign exchange strategy at Calyon in London, says currencies are likely to stay within current ranges until the key news for stocks – the status of U.S. banks and the Treasury Department’s plans – turn clearer. Geithner’s plan and the next stage of the U.S. recovery process, getting banks in order, next month,” said Maher – that will be the next big market moving event.

Near noon on Monday in New York, the euro was at $1.3497, up from $1.3488 late Friday. The dollar was at Y96.13 from Y95.10, according to EBS. The euro was at Y129.75 from Y128.28. The U.K. pound was at $1.5302 from $1.5175. The dollar was at CHF1.1185 from CHF1.1224 late Friday. The yen may also be under pressure after Moody’s Investors Service on Monday cut Japan’s foreign-currency debt rating and after comments from Japanese Vice Finance Minister Kazuyuki Sugimoto. He said Monday that the Japanese government is continuing to monitor the foreign exchange market closely after the yen’s recent strengthening.

The negative impact of excessive market volatility on the economy and financial markets is undesirable,” Sugimoto said at a regular press conference. The rally in risk may have also been prompted by elections in India, according to several analysts. Over the weekend, Prime Minister Manmohan Singh’s Congress Party was returned to power with strong backing. Indian stock market surged 17% and the rupee gained 3% on the better than expected results for the general elections,” said Win Thin, senior currency analyst at Brown Brothers Harriman in New York. He said that India’s rupee could break important technical levels, but warned against getting too bullish on India.

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Yen Advances vs Dollar and European Euro Stocks Eyed for Direction

November 19, 2008 by Prakash Dhawan · Leave a Comment
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* U.S. data shows record consumer price slide in Oct
* Sterling rises, shakes off BoE minutes
* Anxiety abounds about future of US automakers
On 19th Nov, New York:- The dollar fell against the euro and sterling on Wednesday as U.S. stocks stabilized and big buy orders for the European currencies pushed them through key technical levels. A U.S. economic report showing a record slide in consumer prices last month also added to pressure on the dollar as it suggested the Federal Reserve may have to cut benchmark interest rates from an already low 1 percent.
Analysts, however, said investors remained skittish about the health of the world economy and were likely to take future cues from Wall Street’s next move higher or lower.
“We saw euro and the sterling break through key trend lines and momentum traders jumped in and followed the moves to push them higher,” said Brian Dolan, head of research at Forex.com in Bedminster, New Jersey.
But I think this is a false break because we’re likely to see stocks relapse into negative territory, as there’s no reason for them to rally in this environment.

Sterling added 1.5 percent to $1.5200 after breaking above the the $1.51 area, which Dolan said was a key trend line in a steady decline that began when it traded around $1.66. Traders shrugged off minutes from this month’s Bank of England policy meeting that showed policymakers unanimously agreed to cut interest rates by 150 basis points and even discussed a bigger cut. The yen rises along with risk aversion because investors unwind trades in higher-yielding assets and currencies that had been financed with cheaply borrowed yen. Also of particular concern was the fate of the struggling U.S. auto industry, which some investors fear may fail to win emergency government loans.

Michael Woolfolk, senior currency strategist at The Bank of New York-Mellon, said bankruptcy for General Motors, Ford or Chrysler “could prove to be the next Lehman Brothers because of the systematic risk their failure would create.”Markets tumbled in September when U.S. investment bank Lehman Brothers failed. Equities moved dramatically lower in October and the dollar and yen rallied, and most people still fear moves in that direction will reassert themselves,” said David Watt, currency strategist at RBC Capital Markets in Toronto. Economic data on Wednesday showed U.S. consumer prices plunged 1 percent in October, while core prices that remove food and energy costs fell 0.1 percent.

Kathy Lien, head of currency research at GFT Forex in New York, said “less price pressure will give the Federal Reserve more room to cut interest rates,” adding she expects the federal funds rate to drop to 0.5 percent from its current 1 percent next month.

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