Monday, 5 September 2011

Third Week of Gains for Aussie, Can Rally Be Sustained?

The Australian dollar recovered during most of the week, the publication of the third week of gains against the U.S. dollar the longest run of weekly gains since April, but at the end of the week became unfavorable basis for the currency.

The Australian dollar rose on speculation that the Reserve Bank of Australia cut interest rates. Interest rate futures indicate only 20 percent probability that RBA Governor Glenn Stevens reduced the bank's main rate on 6 September. Most traders believe that is 80 percent chance the central bank kept key rates unchanged this month. Australia cash rate target rate is considered larger loans among developed nations.

Aussie's demonstration seemed unstoppable until the U.S. non-farm payrolls came out, sending markets into chaos and destruction of risk appetite to go out even worse than the most pessimistic forecasts. The Australian currency managed to stay above the opening this week, but erased the three days of gains against the dollar and the yen. Worse, it appears that the currency associated with the growth may continue to fall next week as the style of the risk aversion of thought is to return to the markets.

AUD/USD opened at 1.0583, jumped to 1.0764 and closed at 1.0641 this week. EUR/AUD slid from 1.3692 to 1.3346. AUD/JPY jumped from 81.23 to 82.81 during this week before closing at 81.71.
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Pound Profits from Terrible US Payrolls

Britain won the pound against the U.S. dollar as poor U.S. Nonfarm payrolls reduces the attractiveness of the dollar. The pound also rose against the euro as traders are concerned about the European economy.

Forex traders that the owner of Euro want to find a safe haven in Europe's economy shows signs of slowing. The yen and the franc, the currencies being conventional insurance, are the logical choice, but under the threat of intervention. The dollar was feeling the pressure of all the potential third of the quantitative easing for some time and now, after the very unfavorable payrolls were released, intensifying the pressure. No wonder, considering all factors, some traders look at the new pounds of protection.

The problem with thinking about the British pound as the protection of Europe's problem is that Britain has its share of problems. The index of home prices nationwide fell 0.6 percent in August. The manufacturing Purchasing Managers' Index fell from 49.4 to 49.0 in August, the lowest reading in 26 months, while construction PMI fell to 52.6 in August from 53.5 in July.

GBP/USD closed at 1.6215 after jumping during the trading session from 1.6177 to 1.6253. EUR/GBP sank from 0.8812 to 0.8746 before closing at 0.8761.
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US Dollar Suffers From Terrible Nonfarm Payrolls

The U.S. dollar fell against other currencies, including the British pound and Japanese yen today after the non-farm payrolls showed that job creation in the U.S. stagnated. The currency also fell against the euro, but recovered later.

U.S. non-farm payrolls showed no growth in employment in August. That is far worse than market expectations (growth of 74 000) and the worst reading since September 2010, when employment fell by 95,000. Average hourly earnings fell 0.1 percent, while markets had an increase of 0.2 percent. The poor economic report renewed speculation the Federal Reserve needs third round of purchases of assets, known as quantitative easing to boost the economic recovery in the United States.

The index of the dollar managed to rise 0.3 percent, to 74,683 today from 74,479 yesterday. The dollar pared losses against the pound and the yen and rebounded against the euro. The Standard & Poor's 500 fell to 2.3 percent.

GBP/USD climbed from 1.6177 to 1.6253 before trading at 1.6220 as of 19:40 GMT today. USD/JPY fell from 76.91 to 76.80 and touched low of 76.52 intraday. Meanwhile, EUR/USD tumbled from 1.4257 to 1.4199.
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Franc Jumps as US Payrolls Show Zero Growth

The Swiss franc rose today against the U.S. dollar, extending its rally for a third day, after non-farm payrolls showed that U.S. employers were not adding jobs last month.

U.S. nonfarm employment payroll in August were unchanged, while the unemployment rate remained at 9.1 percent. Analysts predict an increase in payrolls by 74,000. Value in July was revised down from 117,000 to 85,000. It will be interesting to see how the Fed will react to such disastrous economic data and what steps will be taken.

USD/CHF plunged from 037954 to 0.7811 as of 13:45 GMT today. Earlier, the currency pair reached 0.7711, the lowest level since August 12.

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Rand Fluctuates as Traders Uncertain About Global Growth

The South African rand fell today as the uncertainty of the forex traders on the global economy's ability to maintain demand for reducing the growth of safer currencies. Currently, however, the rand recovered.

Market participants were less inclined to believe the global economic recovery after the report from Automatic Data Processing showed on August 31 that U.S. employers added 91,000 jobs last month, less than expected reading of 102,000. Market sentiment improved slightly after the report showed yesterday that the number of jobless claims fell from 421,000 to 409,000 last week. Today we will see non-farm payrolls that must have a major impact on markets.

USD/ZAR traded near 6.9950 today as of 12:31 GMT, while previously it surged from 6.9870 to 7.0230.
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