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Greek Crisis Could Lead to ECB, Fed Differences

admin — Tue, 23 Mar 2010 23:41:27 +0000

Crisis to Push Euro Lower

Some currency experts are saying that the Greek debt crisis could provoke a split between the US Federal Reserve and the European Central bank pushing the multi nation currency even lower. In Europe the withdrawal of stimulus measures could lead to double dip recession and deflation. The possibility of stalled recovery has prompted experts from several financial institutions to predict that the European Central Bank will be slow to raise rates further damaging the euro. Many economists fear that Greece’s debt problems could spread to other EU nations such as Portugal, Spain, and Ireland and are pressing these governments to deliver on their promises to implement austerity measures. The euro fell 0.3% against the US dollar to $1.3515 and the euro has fallen a full 10% in the last four months. Recent euro declines have been prompted by speculation that no solution to Greece’s fiscal woes will emerge from Thursday’s EU summit. During the past decade several EU countries have violated EU rules limiting deficits to 3% of gross national product. The Greek crisis has prompted EU nations to implement greater fiscal discipline especially after investors doubled the risk premium on Greek 10 year bonds. Presently Greece has a 12.7% budget gap, the largest in the EU.

EU Nations Struggle to Close Budget Gaps

Other EU nations have promised to bring their budget gaps in line with EU rules by 2013 after the European Commission estimated that the EU’s budget gap hit 6% in 2009, up from 2% in 2008. The commission has forecast an increase to 6.9% in 2010. Laurence Boone of Barclays Capital in Paris stated, “Events in Greece could trigger unusual fiscal discipline in the euro area, implying tighter policy than expected.” Spain is cutting 50 billion Euros from its budget and may raise the retirement age to 67. Portugal is cutting 6 billion Euros and is considering asset sales to close an 8% budget gap. Ireland is planning wage cuts for public workers in addition to welfare cuts to address an 11.7 budget shortfall. Despite the fact that the euro zone economy grew in January unemployment remains at 9.9%, an 11 year high. Euro Zone retail sales fell 0.3% from December 2009.

US May Have Deficit of 10.6% by Year’s End

In the US the Obama administration is forecasting a deficit of 10.6% in 2010 and 8.3% in 2011. Mid term elections are hampering political solutions in the US and legislators are wary of proposing any tax increases or cuts in government programs.

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Investors Trim Risky Assets

admin — Fri, 20 Nov 2009 23:11:35 +0000

Dollar Yen Gain on Safe Haven Demand

Risk aversion has returned to currency markets and the US dollar gained for the second straight session in a row as investors dumped risky assets in favor of the safe haven dollar and Japanese yen. Stocks in Europe and the US fell along with gold and commodities putting downward pressure on commodity linked currencies such as the Canadian, Aussie and Kiwi dollars. Despite recent advances the greenback has declined 14% since March 2009 and the perception that the Federal Reserve will keep rates near zero has also hurt the US dollar. The Japanese yen gained on the euro while the US dollar continues to decline against the yen. Vassili Serebriakov of Wells Fargo stated, “The market is reducing its exposure to risk. The dollar is benefiting.”

Optimism About Recovery Premature

Analysts believe investors and traders want to see concrete evidence of recovery before investing in high yielding assets. European Central Bank President Jean-Claude Trichet said that it is premature to say the economic crisis is over and warned that banks should be prepared for the withdrawal of stimulus programs. Andrew Wilkinson of Interactive Brokers summed up the current situation when he said that investors “are starting to get cold feet over the health of asset market rallies, taking the line that stocks have come too far too soon and that they should — if only for safety’s sake — perhaps hold onto their dollars after all.”

Pound Falls on Banking, Deficit Concerns

The pound declined against the US dollar, the euro and the yen due to investor concerns about massive UK budget deficits and concerns about the health of the British banking sector. Hans-Guenter Redeker of BNP Paribas SA Stated, “People are realizing that things are not looking too bright for high-debt countries. People regard sterling as a higher-risk premium.” Te pound declined 1% against the dollar to $1.6509 and fell 0.6% against the euro to 90.07 pence.

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Declining Stocks Fuel Risk Aversion

admin — Tue, 10 Nov 2009 22:48:41 +0000

Dollar Hits 15 Month Low Monday

The US dollar pulled back from a fifteen month low as declining US stocks pared demand for riskier assets. The dollar is often seen as a barometer of risk sentiment among investors and traders. The pound fell sharply on news that Fitch’s Ratings said that the UK was the major economy most at risk among major economies. The Brazilian real fell the most against the dollar on concerns that the Brazilian government would intervene and try to stop the real’s appreciation which is hurting exports. The Dollar Index rose 0.2% to 75.145 but the index has lost 7.7% so far this year.

Pound Hit by Rating Concerns

The pound pulled back from a six day run against the dollar and fell 0.3% to $1.6712. Fitch Ratings had cautioned the UK government against further stimulus measures citing massive UK debt. David Riley of Fitch stated, “Our stable rating outlook reflected our expectation that the U.K. government will articulate a stronger fiscal consolidation program next year.”

Canadian Dollar Gains

The Canadian dollar gained against the green back as a rise in oil prices sent the commodity based currency higher in currency markets. The currency last traded at 95.26 U.S. cents. David Bradley of Scotia Capital stated, “Everything seems to have turned around at once here. And it looks to me like the Canadian dollar can probably continue to do better.” The rise came after oil edged above $80 a barrel and the promise of the G 20 nations to maintain stimulus policies.

Gold Futures at Record Highs

The decline of risk sentiment has sent gold futures to record highs and many traders predict gold will rise to $1,150 or as much as $1,200 an ounce. The European economy sent mixed signals. Italy and France reported sharp falls in while German output surged. Italian output declined 5.2% and French output fell by 1.5% in September. US Federal Reserve officials are expected to speak on Tuesday and investors will be watching for any signs of changes in monetary policies.

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Dollar Falls on Rate Concerns, Reserve Status

admin — Mon, 19 Oct 2009 16:40:26 +0000

Dollar Hits 14 Month Low-Again

After a slight rally last week the US dollar vs. the euro fell once again to a 14 month low on concerns that the US will keep rates low in the near future. Investors and forex traders are waiting for the results of the meeting of European finance ministers and European Central Bank officials scheduled for later in the day in Luxembourg. Forex traders will watch for comments regarding the strength of the euro which is trading just below the $1.50 level.

Replacing the Dollar

The US dollar has been pressured by investor concerns that the U.S Federal Reserve will keep interest rates to near zero well into 2010 and calls for the replacement of the greenback as a reserve currency. Marcus Hettinger of Credit Suisse in Zurich stated, “The trend clearly is for a weaker dollar due to a lack of interest rate support for the U.S. currency, the U.S. budget deficit and of reserve bank diversification flows into other currencies, like the euro.”

Finance Ministers and ECB Meet in Luxembourg

This year the euro has gained almost 7% against the dollar. Last Friday Eurogroup Chairman Jean-Claude Juncker said that a continued rise in the euro could slow Euro Zone recovery. ECB President Jean-Claude Trichet supports the US government’s policy of a strong dollar. In a note JP Morgan analysts said, “Euro area finance ministers meet today and may talk down EUR/USD, but as the decision is ultimately the ECB’s (which eschews this tactic), any down move in the currency should be brief and shallow.”

More Third Quarter Results

Equity markets are awaiting third quarter results from many US companies including giants Apple Inc. and Texas instruments. Many Forex experts believe last Friday’s dollar rally was prompted by third quarter losses by General Electric and Bank of America which triggered a rise in risk aversion benefiting the US dollar. Most currency traders did not believe the dollar’s rally was sustainable.

Greenback Pulls Back From 14 Month Low

admin — Fri, 16 Oct 2009 22:16:44 +0000

Stocks Fall GE and BOA POst Weak 3rd Quarter Results

The US dollar pulled back from a 14 month low against the euro as global stocks fell and weak third quarter results from General Electric and Bank of America caused a rise in risk aversion. General Electric posted a 42% drop in profits and Bank of America reported a quarterly loss. Despite the fact that JP Morgan posted strong results on Wednesday expectations were dimmed by Friday’s equity market performance. Philip Lawlor of Nomura stated, “JPMorgan set the hurdle rate very high, and at the margin it’s difficult for the banks - you saw it with Goldmans yesterday - to now come in and have the same type of positive reaction.”

US Consumer Sentiment Falls

Traditionally when stocks decline dollar demand rises as risk appetite fades. Paul Mackel of HSBC in London stated, “Equities are looking a bit shaky and it’s the end of the week. So put the two together and the dollar is biased to the upside.” US consumer sentiment fell in October on concerns that the ‘dismal’ state of personal finances may not recover swiftly from the worst economic crisis in decades. Shaun Osborne of TD Securities in Toronto said, “It’s not a particularly good report as we saw a big drop in the outlook. It’s a case of poor data hurting equities but supporting the dollar in a risk-off and risk-on mentality.” The Reuters/University of Michigan consumer survey said that consumer sentiment fell to 69.4 down from September’s 73.5. The dollar index which usually rises when risk appetite declines rose to 75.68.

Canadian Dollar Declines vs US Dollar

The euro vs. dollar exchange rate was down 0.5% to $1.4872 and against the Japanese yen the dollar gained 0.6% trading at 91.09 yen. After reaching near parity with the US dollar earlier in the week the Canadian dollar fell to 96.14 U.S. cents. The decline was caused by profit taking on high yielding currencies after Friday’s bad economic news.

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Forex Converters and ‘Pips’

admin — Wed, 17 Dec 2008 20:30:51 +0000

One of the first Forex terms learned by those new to Forex is ‘pips’. A pip equals 0.0001 of a dollar and is the smallest increment on Forex markets. Many unfamiliar with Forex wonder how money can be made from such a small currency increment like a pip.

The Forex market is the world’s largest market with over $2 trillion dollars traded daily and those pips add up quickly. All the equipment needed to enter the Forex market is an internet connection and an accurate Forex converter. Of course education, patience, hard work, and a working knowledge are necessary to achieve success trading Forex.

Most major corporations these days do business globally and Forex exchange rates can affect profit and loss. If a corporation has offices in France, for example, to pay their employees they must exchange US dollars for Euros. Typically the company would buy what is known as a ‘lot’, usually $100,000. The company would buy the currency pair UDS/EUR. If the Euro was trading at 1.2500USD the company would receive 80,000 Euros at that Forex exchange rate for every $100,000 traded. When trading in Forex markets it is easy to see the importance of a reliable FX converter.

Now, back to those pips. Although a pip is an extremely small number even a 1 pip movement means that 1 pip equals $10 per 100,000 lots. Usually Forex transactions are very large and those pips can add up quickly! Of course as in any market there are risks of loss but these can be easily manages with stop loss orders. Some of the more sophisticated Forex converters follow currency movements in real time giving the investor warning of unfavorable movements.

Thanks to margin the small investor can control $100,000 worth of currency for as little as $1,000 at a 100-1 margin. As with any leveraged position things can quickly deteriorate but consulting a Forex converter often can save the investor from serious loss.

No matter what the investor’s strategy it is always to put stops on every order due to the volatility of Forex markets. New investors would be wise to set up a mock account to familiarize themselves with the way Forex markets work. And don’t forget to acquire a reliable, up to date Forex converter!

Forex Converter

admin — Wed, 17 Sep 2008 20:16:53 +0000

Simply put, a Forex Converter is a program that gives the value of one currency against another in real time. There are literally thousands of converters online all with the same function. Most of these converters are easy to use and list all the world’s currencies. Years ago exchange rates were only available from major banks but since the introduction of the internet exchange rates are instantly available. Many years ago rates were posted once a day even though there may have been many changes in exchange rates throughout the day.

Today banks, Forex brokers, and individual small investors have access to current exchange rates in real time. Generally Forex converters have two sections, one for the base currency and the other for the currency being exchanged. There is usually a box where a currency amount is entered and then the currencies being exchanged from and to are selected usually from drop down menus listing all the major currencies. Many Forex converters offer both the interbank rate and the cash rate. There are literally millions of Forex converters available on the internet.

Currency converters have been essential to travelers for years. Many ATM machines are now equipped with currency converters although there is usually a fee and the exchange rates are usually not the best and using a credit card will rack up interest charges in addition to the unfavorable exchange rate.

Forex converters are an essential tool for any Forex investor. Essentially currency converters, currency conversion or currency exchanges all operate on the principle of valuing one countries currency against another. These currency rates are always moving and changing in relationship to one another. It is essential to the Forex trader that exchange rates be given in real time with up to the minute rates. Using a Forex converter can help the investor determine changes or trends in Forex markets. Forex traders are in the market to make money and a good Forex converter is an essential tool for success.

Today banks, Forex brokers, and individual small investors have access to current exchange rates in real time. Generally Forex converters have two sections, one for the base currency and the other for the currency being exchanged. There is usually a box where a currency amount is entered and then the currencies being exchanged from and to are selected usually from drop down menus listing all the major currencies. Many converters offer both the interbank rate and the cash rate. There are literally millions of Forex converters available on the internet.

Forex converters are an essential tool for any Forex investor or trader. Essentially currency converters, currency conversion or currency exchanges all operate on the principle of valuing one countries currency against another. These currency rates are always moving and changing in relationship to one another. It is essential to the Forex trader that exchange rates be given in real time with up to the minute rates. Using a Forex converter can help the investor determine changes or trends in Forex markets. Forex traders are in the market to make money and a good Forex converter is an essential tool for success.