Foreign Currency Wars

Foreign currency wars are aimed at moving towards inflation and not growth.

The finance minister of Brazil Guido Mantega coined said term in 2010 to describe policies during that time of key central banks. These were meant to enhance competitiveness of financial systems through shaky currencies. At present, lower FOREX rates can be a means of avoiding paralyzing deflation.

Feeble price growth suffocates economies from the European Union to Japan and Israel. Eight out of 10 currencies with biggest projected declines until 2015 come from countries which are in deflation or practice policies that destabilize exchange rates.

If a certain jurisdiction undermines its exchange rate, another one becomes stronger. It makes imported commodities cheaper. Deflation can both become a consequence and contributor to the slowdown of world economy. It can push the euro area near recession and reduce demand for exports from nations like New Zealand and China.

Governor Haruhiko Kuroda of the Bank of Japan says he is more amenable to lower exchange rates that can help meet inflation targets and extend the country’s unparalleled stimulus program. Meanwhile, the European Central Bank President recognized the need for a weaker currency to stay away from deflation. It can also make exports highly competitive.

The Argentine peso is declining after debt default and devaluation. The Japanese currency is expected to become the biggest loser among principal currencies by end of next year. A six percent drop has been projected. It has built a 5.5 percent slip since the middle of 2014.

The euro is also looking at a slump of 4.8 percent.

 

Gold Movement

Gold Commodity PricesGold priced at $4.30 and trading at 1249.00 as marketers are continually worried about issues of global growth and recovery seeing the sliding back of the eurozone. Two weeks have passed in October and precious metal just made a speedy turnaround from key support levels of the rate $1180 and presently selling at $1249. The minutes of the new US FOMC meeting were a surprise making the green bucks to de-escalate and gold to escalate. Amazingly, for the last several months, SPDR gold holdings were all plunging but at last have become stable with no greater changes until today. Gold moved forward to the highest level in six weeks as investors’ evaluated the global economy, as well as the monetary outlook for policies amidst the largest annual sale from the biggest exchange-traded product. No major cues are found in the market especially coming from the front economic data this session; however, gains could be very minimal.

Equity markets of Asia is trading on a mixture of positive note dealing in the positive nearness of the equity markets for US and uplifted by the data of GDP released from China this morning. GDP of China arrived at 7.3% versus the expected 7.2% expectations by the markets, it alleviated the anxieties of the feeble growth in China.

Asian Stocks Move Up

Asian shares pulled ahead on Wednesday, taking their cue from Wall Street’s strong performance as upbeat results from two technology bellwethers offset recent concerns about the outlook for the global economy.

In U.S. trading, shares of Apple Inc (AAPL.O) and Texas Instruments Inc (TXN.O) gained on stronger-than-expected quarterly earnings, lifting the tech-heavy Nasdaq Compositeindex .IXIC more than 2 percent. The S&P 500 .SPX added 1.96 percent to mark its biggest daily percentage gain since October 2013 and its fourth straight rising session.

European shares also posted gains on a Reuters report that the ECB was readying a plan to buy corporate bonds, a step that would help banks free up more of their balance sheets for lending.

 

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.2 percent, while Japan’s Nikkei stock average .N225 was up 2 percent in early trade, rebounding from a sharp drop of a similar magnitude on Tuesday.

Japanese trade data released early Wednesday underpinned sentiment, as it showed Japan’s exports rose 6.9 percent in September from a year earlier, a tentative sign that external demand is starting to pick up.

The upbeat mood in equities markets sapped the safe-haven appeal of U.S. Treasuries, pushing up their yields. The yield on benchmark 10-year U.S. Treasury notes stood at 2.227 percent in Asian trade, up from Tuesday’s U.S. close of 2.208 percent.

Data showing a stronger-than-expected 2.4 percent rise in U.S. domestic home resales last month provided evidence that the U.S. economic recovery maintained momentum and also put upward pressure on yields.

Higher U.S. yields helped bolster the greenback, with the dollar index .DXY rising to 85.381.

“Given heightened concern about falling inflation expectations, attention turns to the US September CPI report,” strategists at Barclays said. “Our thesis of USD outperformance driven by relative US strength and interest rate divergence remains intact, but is at risk of delay pending soft underlying inflation trends.”

The dollar was steady on the day against the yen at 107.04 yen, holding its overnight gains, while the euro nursed its losses after dropping on the ECB news, and stood at $1.2713 in early Asian trade.

Oil News

Petroleum IndustryBlack gold is losing its earlier gains trading on the floor by 18 cents at 82.25 while Brent Oil is easing by 9 points to reach 86.07. The inventories of API crude oil inventories upped by 10.2 million barrels ending the week on the 10th October 2014. Stocks of gasoline dropped by 3.1 million barrels while inventories of distillate went down by 0.156 million barrels at the same time period.

Last week, the EIA released it inventories report and showed that inventories of US crude oil upped by over 9 million barrels for the week ending on 10th Oct 2014. The stocks of gasoline rose by 4 million barrels. The trading of crude oil prices lowered last week going to a run loss due to concerns over weakening oil demand as the equity markets plunged and economic gloom widened. Factors exerting downward pressure are concerns over growing oil supply and declining global equities. Aside from growth concern in global economy, there is also the slow demand from Asia, as well as inventory buildup in the US.

The downward changes in the 2015 global oil demand by the International Energy Agency have added pressure to the market. In inflation rate of China inflation came slower than expected last September to a low of near five-year, giving more anxiety that global growth is restricted fast unless bolder steps are taking by the governments to boost up their economies.

Crude oil prices are expected by traders to be lowered and ample supply of crude markets will remain and this factor will be a resistance for oil prices .IEA demand for lower forecast of oil will cause global prices to collapse acting as negative factor. Moreover, OPEC will continue its production despite falling prices.

 

Primary Currencies in Tight Trading

Key global currencies figured in strong trading as market investors faced lack of new data and fairly small price changes in world markets.

The exception was Japan where stocks recovered due to potential spending for public pension funds which helped topple the yen.

After one week of currency market orbiting, investors seemed reluctant to make new bets earlier than the release of inflation data from the United States as well as manufacturing reports in the Euro Region.

Additionally, the US Federal Reserve is expected to go on with its plan to forego with quantitative easing at the end of October. Benchmark interest rates are forecasted to stay close to zero going to 2015.

The yen dropped following the surge of the Japanese stock index, Nikkei-225 by four percent considering positive economic data along with news about the $1.2 trillion public pension fund of Japan. This will possibly raise allocation to domestic stocks roughly 25 percent from the previous 12 percent.

The US dollar declined 0.5 percent against the Japanese yen at 106.81 yen. The single currency traded at $1.2809 which was up 0.37 percent.

The Pound Sterling rallied and traded up 0.51 percent to $1.6176. The UK currency’s sharp reduction pulled its 100-day moving mode a little below the 200-day term. A shorter-term average that cuts below the longer-term is perceived as a negative indicator for the market.

Prices of German producers fell for the 14th straight month underscoring disinflationary pressures which led to apprehensions in the market.

 

Aussie Dollar Gains

AUDThe Australian dollar gained with a push of significant economic data from China. This turned around outlook generated by previous minutes from central bank board meetings this October.

The pair of AUD/USD traded at 0.8810 which was an increase of 0.29 percent.

Meanwhile, USD/JPY shifted hands at 106.83. It was down 0.11 percent. The EUR/USD pair last traded at 1.2799. There was a slight decrease of 0.01%.

According to Chinese economic officials, gross domestic product for the quarter went up by 7.3 percent. Industrial output last September rose 8.0 percent. This was more than the 7.5% projection. Retail sales during the same period gained 12% year which is above the 11.8 percent that was forecasted.

The RBA board believes that the present monetary policies are suitable for promoting sustainable development for effects of inflation and demand are in conformity with economic targets. Steadiness of interest rates is expected.

The US currency traded for the most part lower versus majority of major currencies. Investors’ pricing anticipated that flexible economies in the Euro Region and Asia can reduce US recovery.

The German Central Bank revealed that its economy hardly moved forward during the third quarter due to the deterioration of business sentiments.

It was more wary of the fourth quarter point of view although the German Central Bank does not expect any recession to happen.

The ECB embarked on a fresh stimulus program buying covered bonds to amplify liquidity in the region.

Oil Traders Perceive Slide in World Prices as Decline

Oil traders believe that the 27 percent drop in world prices as declining market.

Decrease in crude oil has dragged retail fuel down more than 50 cents per gallon from a one year peak in April. It translated to savings of $500 for the average American family which consumes almost one thousand gallons of fuel annually. This is based on data gathered by the Federal Highway Administration and Energy Information Administration.

The fall in gasoline prices signify the largest benefit that consumers have obtained from a best ever boom in local oil production. This rush forward contributes to international crude surplus and helps reduce world market prices. Gasoline from the US is being exported at exceptional levels this year.

Gasoline follows significant decrease in the oil market. Brent crude serves as benchmark worldwide.

It closed recently at $86.16 per barrel on the London-based ICE Futures exchange in the euro region after falling down to $82.60. It was so far the level since November of 2010. Oil prices are declining at the highest point since 1985. The Organization of Petroleum Exporting Countries produces the most crude in over one year. Meanwhile, the International Energy Agency brought down its projections for demand growth this year all over the world.

American families spend close to $230 million daily less on fuel compared to July.

Oil traders believe that the 27 percent drop in world prices as declining market.

Decrease in crude oil has dragged retail fuel down more than 50 cents per gallon from a one year peak in April. It translated to savings of $500 for the average American family which consumes almost one thousand gallons of fuel annually. This is based on data gathered by the Federal Highway Administration and Energy Information Administration.

The fall in gasoline prices signify the largest benefit that consumers have obtained from a best ever boom in local oil production. This rush forward contributes to international crude surplus and helps reduce world market prices. Gasoline from the US is being exported at exceptional levels this year.

Gasoline follows significant decrease in the oil market. Brent crude serves as benchmark worldwide.

It closed recently at $86.16 per barrel on the London-based ICE Futures exchange in the euro region after falling down to $82.60. It was so far the level since November of 2010. Oil prices are declining at the highest point since 1985. The Organization of Petroleum Exporting Countries produces the most crude in over one year. Meanwhile, the International Energy Agency brought down its projections for demand growth this year all over the world.

American families spend close to $230 million daily less on fuel compared to July.

Asian Stocks Start Week Positively

forex currencies and commoditiesAsian stocks were up on Monday because of stable US data and gains. The buoyant figures somehow reassured investors.

The MSCI record for Asia-Pacific shares was ahead 0.6 percent during initial trading while the Nikkei stock average in Japan increased roughly 2.6 percent after recovering a portion of the five percent it lost last week.

All major stock indexes climbed up more over one percent in Wall Street. However, S&P 500 fell to its fourth consecutive weekly decline which was the longest streak in three years.

Earnings will probably be in the limelight this week as results are expected from 128 S&P 500 companies to include six components from Dow Jones.

64.2 percent of 81 S&P 500 component companies which reported results for the third quarter of the year have exceeded expectations. This is still less than the average during the last four quarters but higher than the previous two decades.

Meanwhile, US Treasuries declined last Friday while growing yields added to the appeal of the US currency. Yield on standard 10-year notes was 2.198 percent during trading which was steady based on the closing of 2.199 percent. It was higher than above 17-month lows last week.

Value of the US currency’s net long position climbed up to $43.04 billion from $40.91 billion.

The euro was also down 0.1 percent at $1.2748.

Euro Banks Crash

European bank Deutsche Bank AG fell 11 percent while BNP Paribas SA was down 13 percent. This sent equity returns to over two percentage points lower compared to the broad market.

The European Central Bank is expected to review some 130 balance sheets In the Asset Quality Review as part of the assessment of lenders’ preparedness for theoretical interference. Positive results from this third exam in the euro region since the 2010 sovereign-debt crisis can help banks avoid significant losses.

Meanwhile, European lenders rose 123 percent since the middle of 2012 when the ECB announced that it was doing everything to sustain the single currency. The rally hit the highest point even as both BNP Paribas and Credit Suisse Group AG were imposed fines

On the other hand, UBS AG and Deutsche Bank were hard pressed to boost revenue in the wake of regulatory investigation.

This Comprehensive Assessment began in October of last year. It was one means of ensuring that the ECB knows what it is doing business with.

Eight banks did not pass this stress test when it was held in July of 2011. There was a collective capital deficit of 2.5 billion euro. Lenders gauge dropped 14 percent the following month.

Most-owned options on the index of these banking institutions look positive though.

NZD/USD Pair Update

NZDUSD FOREXFour points were added to NZD/USD as it went versus the frailer US dollar following the printed PMI forecast of NZ business. As the kiwi accelerated to trading 0.7990, it touched high for 3-weeks despite anxiety for global growth of economy, as the prices of dairy products rose to the latest auction. The dollar index measured the greenback against major currencies dropping to lowest a month following a US sales of retail that came weaker than its expectation. The prices data of producers revitalized concerns about the expanding world’s biggest economy.

Concerns about the growth of global economic were increased after a report of China’s consumer prices slackened more than its expectation in September at a low of five-years. Fortnightly, the Global Dairy Trade of Fonterra Cooperative Group auctioned Dairy product prices rose and recovered from the lowest level within the last five years, as lesser products was placed for sale.

Although, the increased of kiwi dairy prices is positive, it was not able to explain the gain of local currency overnight due to New Zealand demand for dairy products that was affected by the weakening global growth.

The NZD was the best performer as it upped1.9% to 79.90 cents. Global Trade said that whole milk powder average price increased to $2,503 a metric ton from $2,443 at the previous auction.