Asia Session Today's Market Update

The day in Asia was dominated by reports out of the UK's Independent newspaper stating that a group of Gulf Arab states were in secret talks with the likes of China, Japan, France and Russia to replace the US Dollar for the trading of oil. The dollar would be replaced with a new basket currency that would include the Euro, Yuan, Yen and gold. Needless to say, this news spread quickly, adding to the continued woes of the US Dollar that began in New York with a spark in risk appetite. The report cited both Chinese and Arab banking sources who added that the plan could be implemented within nine years.

Traders liked what they heard and continued to buy EUR/USD into Asia, pushing the pair through 1.4710 highs, as comments from the US Fed's NY President Dudley stating that the US was not considering an end to its accommodative monetary policy anytime soon helped grease the wheels of the move. GBP/USD made subtle gains to the tune of 40 pips to a 1.5970 high as another wave of quantitative easing put into action by the BoE helped dampen Cable strength against the reeling Greenback. Spot Gold continued to grind higher on the dollar weakness, hitting a high just over $1020.00, not too distant from the all time high of $1032.35 from March of 2008. USD/JPY skid to levels a hair under the 89.00 figure to register a weekly low.

The other news of the day was from Down Under as the Reserve Bank of Australia surprised the market and boosted its rate by 0.25%, to pull its 3.0% interest rate up from a 49 year lows to 3.25%. Australia was the first G-20 nation to raise interest rates after the onset of the global credit crisis. The market expected the RBA to leave the rate unchanged, and the move sent the AUD/USD skyrocketing from around 0.8750 to a touch higher than 0.8870 which was in fact a new high for 2009. AUD/JPY and AUD/NZD both made gains over one big figure on the release and seemed well supported heading into London.

Dollar will Rebound Before 2009 Ends

The dollar had one of the best weekly performance in months gaining versus most of the 16 main traded currencies as the Group of 7 suggested that a strong greenback is important to guarantee a fast and sustainable world economic recovery.

Multiple finance ministers and central bank policy makers from the wealthiest nations in the world affirmed in a G-7 meeting which took place in Istanbul that a strong dollar is essential for the stabilization of the world economy, providing support for the U.S. dollar to touch a one-month high versus the euro and erase previous looses versus several key-currencies. North American officials like Treasury Secretary Timothy Geithner and ECB President Jean-Claude Trichet agreed on the importance of a strong dollar to maintain the world economy in a recovery path, and its position of main reserve currency should remain in currency markets, adding confidence to the dollar outlook.

Even if key central bank personnel are agreeing that a strong dollar is fundamental for the economic scenario to improve, the situation among traders may not be in total concordance with policy makers’ opinions, according to analysts. Mixed economic data is still playing an important role in the dollar’s volatility, and it is hard to determine what direction the dollar, the euro, and the economic conditions around the world will take towards the end of the year.

EUR/USD closed the week at 1.4580. GBP/USD closed at 1.5941.

If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Pounds Ends Another Week Down on Crisis

The pound has been one of the most affected currencies by the credit crunch last year and during the past three weeks it suffered another substantial decline as the U.K. economic scenario continues to deteriorate and this Friday risk aversion is high again pushing investors towards safety.

Today the British currency found obstacles to climb in both domestic and international economy scenarios, as risk aversion rose globally. Nationwide Building Society indicated today a worse than previous forecast for house prices increase in the U.K., raising concerns on the real estate market which was one of the most impacted by the global slump last year, especially in England. Equities markets in the U.K. and overseas also had a negative day before a G-7 meeting which may approach sensitive topics regarding the economic future in the world’s wealthiest nations, forcing investors to opt for safer assets and damping demand even further for the U.K. pound.

The situation in the U.K. and the current problematic market sentiment make of the British pound one of the worse bets available in foreign-exchange markets, as Bank of England’s inefficiency to cope with financial problems in the country becomes more evident by the day, damping demand for the British currency which is likely to remain unattractive for a while.

GBP/USD traded at 1.5851 as of 10:49 GMT from a previous rate of 1.5966. EUR/GBP traded at 0.9173 from 0.9109.

If you want to comment on the Great Britain pound’s recent action or have any questions regarding this currency, please, feel free to reply below.

Dollar Climbs on Economic Forecasts

The dollar kept its previous days trend gaining versus the euro and high-yielding currencies as forecasts suggest that loan defaults and unemployment rates will keep deteriorating, raising risk aversion and adding attractiveness for the safe profile of the greenback.

An expected rise in unemployment figures, and a still very complicated credit situation in the United States rose concerns among traders regarding the economic recovery in North America and consequently in a global dimension, slashing earlier gains this week for higher-yielding currencies and favoring currencies with a relative safe profile, as the U.S. dollar and the yen. The dollar is likely to end today’s session setting a second week of gains versus the euro, as the current strength of the Eurozone currency is already raising policy makers concerns, as it decreases competitiveness for European products and could slow down the economic rebound in the region.

A negative day in stocks and commodities while market sentiment impacted by U.S. employment figures and the Group of 7 meeting which may approach sensitive topics are providing support for the dollar tor remain strong in the short-term at least. If concerns regarding a strong euro be confirmed in the G-7 meeting, the dollar may extend gains versus the euro during the next week.

EUR/USD traded at 1.4543 as of 9:47 GMT from a previous rate of 1.4565 yesterday. USD/CAD traded at 1.0894 from 1.0747.

If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.