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Despite general US data thus far this week coming in a little softer, the dollar retains a bid tone, as US risk markets keep on posting new highs despite much speculation on whether USD may have rallied a little too far, too quickly.
Today we await CPI numbers and US data including housing, jobless claims and the Philly Fed.)
The depreciation of the Japanese yen has been an ongoing process for many months now, and recent developments have contributed to its continued decline. However, upcoming data might change the direction upwards.
Japan’s currency is once more weakening compared to the US dollar.
The euro rapidly gave up the optimism it had discovered of late (particularly during the rally of Tuesday and Wednesday), after yesterdays comments from Bundesbank President Jens Wiedmann and a general 'risk off' safe haven attitude swept the foreign exchange markets.
Whilst the euro has traded within tight ranges today in an almost uneasy calm, the comments the president of the Bundesbank cannot be taken too lightly.
Recent data and statements from Japan are keeping the yen on its sliding path. Meanwhile, the European currency is showing a glimpse of recovery, but upcoming data might prove otherwise.
The yen (JPY) is staying on a downward movement against all of its major counterpart currencies. Yesterday it fell as low as ¥99.60 per U.S. dollar, the lowest level in almost four years.
The FX markets are quiet and subdued post the Easter Holiday weekend, but it may be a case of the calm before tomorrow’s “Central Bank storm”, which includes rate decisions from the Bank of Japan (for us sitting in London this is tonight) the ECB and the BoE.
Elsewhere, it could also be the calm before the storm for commodity currencies with a slightly increased appetite for risk, albeit fragile, beginning to creep back in to the market.
The Cyprus crisis was short-lived (or at least it seems to be at the moment), but the relief surrounding the bailout did little to help the euro. And the US dollar is now rampant, so how to play these markets?
Against the current strength in the US dollar there seems little that the euro can do. The Cyprus bailout unsettled investors, while the trend in US economic data has been one of steady, if incremental improvement.
The Cypriot parliament rejected last night the proposed plan to tax deposits in Cypriot banks. What does this mean for the euro going forward?
The deposit tax idea was proposed by the European Central Bank representative to the Eurogroup, Jörg Asmussen, on the early morning hours of Saturday. The plan involved taking €5.8 billion from Cypriot depositors in order to receive €10 billion from the IMF, EU and ECB ('the troika') to help the country through its banking crisis.
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The Chinese currency, the renminbi, this month strengthened to its highest level against the US dollar since it was 20 years ago. This is a combination of natural market forces and the opening up of the currency by the Beijing government.
While China’s currency is officially called the renminbi, as ours in the UK is called sterling, the renminbi’s unit of account is the yuan, as our unit is the pound. The renminbi was once pegged against the dollar but this has been loosened so now the currency is in a ‘managed’ floating exchange rate which is based on market supply and demand with reference to a basket of other currencies.
Sterling finds itself under renewed pressure as the possibility of a ratings downgrade (as imminent as this week, according to some) looms ever larger.
If indeed the UK does lose its AAA credit rating, then any last embers of a “safe haven” type environment (established because of the even weaker performance of rival economies) would likely dissipate, especially if investors decide (rightly or wrongly) that the euro zone and US are finally emerging from the doldrums.
Thu, 1st Jan - * Homeserve shares were rising strongly after the group said it is confident it will return to modest growth in 2014/2015. The group said it has clear Sales and Marketing plans for increasing both customer acquisition and retention and expects UK customer numbers to stabilise at around 1.9m from March 2014.
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