Forex Rebates World

Australia surprisingly reported that consumer spending recently had decreased, something that wasn’t expected by most analysts. As a result of the fall in spending, the Australian dollar dropped from a 24-week record level against the U.S. dollar. Spending in the retail sector declined for the first time in two quarters. The report spurred speculations that the Reserve Bank of Australia will be forced to lower benchmark interest rate at their meeting tomorrow. By lowering interest rates, the country stimulates the economy by increasing borrowing and spending. However, as a result of lower interest rates, the demand for Australian dollar held assets will most likely fall due to lower yields. Apart form negative domestic news, general risk appetite decreased in the forex market on concerns that the European crisis will do even more damage in the near future.

The Australian dollar fell 50 basis points, a half percent, against the U.S. dollar. The Australian currency also managed to drop 40 basis points against the Japanese currency for the first time in several days.

The Asian region is currently on a hot streak as demand for currencies and stocks in the region continue to increase. Currently, the Asian region is witnessing the largest inflows of capital due to higher yields and better performing economies than most other regions. Apart from these countries having higher economic growth, higher interest rates have also led to a more attractive bond market, where yields are over 20 percent higher than equal ones in the U.S.

On top of the performance of these economies, recent news and global event have increased demand for assets with higher yields, making Asian currencies further appreciate in the forex market. An index of several Asian currencies gained 180 basis points today alone.

Currently, outlook in the U.S. is that the economy will grow somewhere between 1.5 and 2 percent, while Europe is heading for a contraction of around 0.5 percent. Meanwhile, the Asian region is on their way to 7 to 8 percent growth during 2012.

Several Asian currencies appreciated in the forex market today, mainly headed by the Indian rupee and positive reports coming out of India. The Indian government announced that they would lower the minimum requirement for lenders, which will be at its lowest level in about two months. The Indian Reserve Bank also announced that they are willing to lower interest rate in the coming weeks in order to increase growth in the country.

Apart from the Indian Central Bank, there were several other Central Banks in the Asian region that took measures to fight the current economic slowdown. Indonesia, along with Thailand and the Philippines, has reduced the cost of borrowed capital in their economies.

The Indian rupee appreciated 30 basis points and the Philippine peso gained 20 basis points against the U.S. dollar today.

The euro’s winning streak came to and end today as the currency depreciated against the U.S. dollar in today’s forex trading session. Some investors believed that the streak would end after its first day, while others predicted that it would last several days more. It turns out that investors could enjoy the rally of risky assets for four days before the winds turned.

As the winds turned, the demand for the U.S. dollar increased significantly as investors shunned from risky assets and turned to safe havens. The U.S. currency managed to gain against almost all major currencies, with the exception of the Japanese yen.

Although the euro fell 0.5 percent against the U.S. dollar, it is still headed for a gain this week due to the high gains made previous days.

The South African rand had a very good day in the forex market as the currency reached a 40-day high versus the U.S. dollar. There were several factors behind the rand’s and other emerging markets currencies’ appreciation.

The first big news that gave currencies of emerging markets a boost were European countries ability to raise funds without any difficulties, despite recent downgrades made by Standard & Poor’s. The main countries involved were Spain and Greece, who were given a two-notch downgrade just a few days ago. Another thing sparking a boost in riskier assets were reports that China’s Gross Domestic Product increased more than economist had predicted, hinting that that the global economy is heading for recovery.

The South African rand touched a 140 basis points gain against the U.S. dollar, before it headed back to a level of 80 basis points. The currency also managed to appreciate 30 basis points against the euro.

The President of the European Central Bank, Mario Draghi, spoke about the effects and results of the recent implemented policies in the European Union. Overall, the President seems to be satisfied with the results and he is optimistic that the European financial industry will survive the current crisis.

Draghi claims that the decision to offer low costs for borrowed capital, letting banks and financial institutions lend money at very low interest rates, is starting to show promising results. The President mainly pointed at lower yield rates in countries that suffered the most from the crisis, mainly Spain and Italy. However, he does acknowledge that there still are many problems and possibilities of a recession ahead.

Mario Draghi assured that the low interest levels would remain for a prolonged period and that, if the situation requires it, they might be cut even lower. The action to make capital cheaper will largely depend on current and estimated future inflation in the region.

The British pound is continuing its latest days of appreciation against major currencies in the forex market. The U.K. currency kept gaining against both the U.S. dollar and Japanese yen today, while the value against the euro remained pretty much the same as yesterday, which was a record level.

The pound appreciated 0.2 percent against the U.S. greenback and 0.2 percent against the Japanese currency. Although the U.S. dollar has been a top performer this year, the British pound has not ben far behind. The U.K. currency has appreciated over a full percentage against an index of nine of the most traded currencies in the world. Meanwhile, the U.S. dollar has gained just under 2.5 percent.

The British economy has also shown some good figures lately, recently proving that business investment turned out to be 1.5 percent higher than analysts had predicted for the fourth quarter.

The U.S. economy and U.S. dollar based assets has thrived since Standard & Poor’s claimed that they no longer were worthy of the once earned AAA rating around 120 days ago.

The U.S. dollar has been the best performing currency by far, gaining well over 8 percent against an index of the most traded currencies in the world. Furthermore, the demand for U.S. treasury bonds has been insatiable and the S&P 500 has gained over 1.5 percent. Today, in hindsight, it looks as if the credit agency was way off when evaluating the future of the U.S. economy and assessing whether or not it was risk free.

The U.S. has showed strong solid numbers over and over again. Employment is steadily rising, there is more output and overall consumer outlook seems positive and that he American people will keep on spending. The country is currently enjoying large capital inflows and record low borrowing costs.

The Indian rupee has experienced large declines this year, and has been one of the absolute weakest currencies of the Asian region. However, investors believe that the trend is about to change and that next year is all about the Indian currency.

India’s Prime Minster promised that investors will see a more open country and that the Indian government will work hard to interest foreign investors. The country has already seen an increase in rupee-held assets as inflation is starting to slow down. The general consensus is that the country does not need to further increase interest rates to fight inflation, which means that they can focus on stimulating the economy.

The Indian rupee strengthened 1.8 percent against the U.S. dollar today. Although it is a good gain, it is still a small relative bounce back from previous deprecation this year.

The euro depreciated 0.2 percent against the Japanese yen today, which is the lowest level in 70 days. The general market consensus is still that European countries are not doing enough to solve the current debt crisis, which has had a very large impact on the value of the Euro-zone currency. Although there were big movements against the Japanese yen, the value against the U.S. dollar was basically the same during todays session.

Europe continues to experience problems as Spain sold almost twice as much bonds as they had set out to do, increasing the government debt. Italy had its own problems, bond-yields reached record levels as the Italian parliament are to pass a large financial package aiming to reduce fiscal deficits.

Meanwhile, the Swiss franc appreciated against most major currencies, including the euro, as the Swiss National Bank decided not to intervene with the country’s overvalued currency.