Forex - Yen extends decline as stocks rally

The euro climbed nearly 2 percent against the yen on Friday as a rally in global stocks fuelled appetite for riskier trades, putting the low-yielding Japanese currency under pressure.

Gains in high-yielding units such as the New Zealand dollar also underscored improved risk appetite as stocks rose across Europe and Asia, with Japan's benchmark Nikkei .N225 surging more than 4 percent in its biggest one-day gain in about six years.

Stock investors were cheered by a U.S. tax stimulus package, reassuring U.S. jobs data and the prospect of another Federal Reserve rate cut next week, all tending to ease fears that the world's biggest economy will slide into recession.

"You have a combination of dollar weakness and yen weakness with yen making more significant losses against other currencies, which fits in with the events that have unfolded over the last 24 hours," said Steve Barrow, currency strategist at Bear Stearns.

Stock market moves are often regarded as a barometer of risk appetite, and financial markets have calmed down after swinging wildly earlier in the week on an emergency interest rate cut by the Federal Reserve and escalating fears of a U.S. recession.

Forex-Euro bounces back as rate cut hopes ease

The euro strengthened against the dollar and yen on Thursday after tough talk on inflation from European Central Bank policymaker Axel Weber dampened expectations of a possible near-term interest rate cut.

The yen retreated on the back of the bounce in the euro and as European stocks extended their rally, after earlier gaining on lingering concerns over the health of the global economy.

"For the time being, the ECB are maintaining a very hawkish line so no signs of any rate cut any time soon," said Chris Turner, head of FX strategy at ING.

"You're then left with sharply lower U.S. rates, stable European rates and with equities doing quite well at the moment ... the market is just going to focus on the dollar bearish story."

Weber said the U.S. Federal Reserve's surprise decision to cut interest rates by 75 basis points this week hasn't shifted the ECB focus on euro zone inflation, dampening mounting expectations that it too will have to cut rates soon.

The euro climbed 0.3 percent to $1.4683 by 1206 GMT and was also up 0.3 percent versus the Japanese currency at 156.60 yen , well above an early low of 154.86 yen.

The dollar was steady against the Japanese currency at 106.65 yen , off early lows.

Forex - Surprise Fed rate cut sparks U.S. dollar sell-off

The dollar tumbled against major currencies except the yen on Tuesday after the Federal Reserve unexpectedly slashed its benchmark overnight lending rate in an attempt to allay market fears of a U.S. recession.

The Fed's emergency move to cut rates by three quarters of a percentage point was precipitated by a global equities rout.

The U.S. central bank's move wiped out the dollar's yield advantage over the euro, with the federal funds rate target now at 3.5 percent and official euro zone interest rates at 4 percent. This put the European currency on track to post its biggest one-day gain against the dollar in two years.

The cut, which preceded next week's Federal Open Market Committee monetary policy meeting, was not enough to prevent U.S. stocks from falling when the market reopened after Monday's public holiday. For details see [.N].

"We are skeptical that the rate decision will have a lasting impact in offsetting concerns over economic slowdown," Tom Fitzpatrick, global head of foreign exchange at Citigroup in New York, said in a note to clients. "Lower interest rates do little to address underlying weakness in the U.S. housing sector and broader economy."

In New York late afternoon trade, the euro was up 1.2 percent on the day at $1.4613 after briefly racing to $1.4643. The euro has rebounded from a one-month low against the dollar of around $1.4366, according to Reuters data.

"Under any other Fed this would not be a surprise, but this Fed has been reluctant to cater to market expectations," said Mark Meadows, currency strategist at Tempus Consulting in Washington. "This should support the euro in the short term, however our long-standing view is still that the U.S. economy will rebound and help the dollar gain into the middle of this year."

Forex-Canadian dollar firms as BoC cuts rates

The Canadian dollar firmed against most currencies in volatile trade, after the Bank of Canada cut interest rates a quarter point, compared with some market speculation of a half-point reduction.

However, the currency's gains were limited as the central bank also gave a heavy hint of further loosening to come.

At 14.20 GMT the US dollar was a touch weaker against its Canadian counterpart, at 1.0320 cad from around 1.0345 just before the announcement.

The Canadian dollar was also firming against the euro, pound and yen.

Forex - Euro Softens on weak German PPI Inflation

The euro softened after the release of the German PPI figures, which having come in below expectations, reminded investors that euro zone interest rates are more likely to fall later this year than rise.

German PPI fell 0.1 pct on the month in December, well below forecasts for a 0.2 pct rise. Although not momentous in itself, the figures echoed comments by European Central Bank member Yves Mersch last week who said that concerns over inflation were overdone.

Those comments then caused a sharp sell-off in the euro, which remains vulnerable to any indications that inflation is easing at a time when growth is slowing markedly.

'The market has to get used to the idea that the ECB may shift from its hawkish stance with an eye on easing policy by the end of the second quarter,' said Gavin Friend at Commerzbank.

'The market may have to wait until the next ECB meeting in order to get a better idea about the future stance of the ECB, considering that several members like Axel Weber and Jean-Claude Trichet are still sounding hawkish,' said Friend.

Until then, the economic data will be watched closely.

Meanwhile, the dollar was somewhat higher, riding on positive momentum from last week when the US government proposed a fiscal plan to support economic growth, although movements may be limited as US markets are closed for Martin Luther King Day.

The 145 bln usd package, unveiled on Friday by US President Bush, will seek to complement interest rate cuts by the Federal Reserve in order to spur consumption and avoid a recession this year. The dollar gained somewhat on the news, although analysts warn that the focus may soon revert to interest rate differentials -- weakening the greenback -- as closer analysis of the fiscal stimulus reveals it may not be sufficient.

'Fiscal help in the 1960s, 1970s and during the 2001 recession showed that there was little impact on personal spending as empirical research showed that much of the rebate was saved or used to pay previous bills rather than leading to any fresh spending,' said an analyst at BNP Paribas (other-otc: BNPQY.PK - news - people ).

In the UK, the pound was weaker after yet another housing survey, this time from Rightmove, which said prices fell 0.8 pct on the month in January.

The data reinforces the view that the UK housing market is experiencing a downward correction, and that the Bank of England is likely to cut interest rates at its next policy meeting in February.

Eyes will now turn to the release at 0930 GMT of public finance figures, mortgage approvals data, and money supply.

London 0845 GMT Hong Kong 0500 GMT

US dollar

106.14 yen down from 106.87 yen

1.1041 sfr down from 1.1043 sfr

Euro

1.4516 usd down from 1.4532 usd

154.07 yen down from 155.34 yen

1.6026 sfr down from 1.6059 sfr

0.7446 stg down from 0.7449 stg

Sterling

1.9496 usd down from 1.9513 usd

206.92 yen down from 208.39 yen

2.1521 sfr down from 2.1551 sfr

Australian dollar

0.8714 usd down from 0.8761 usd

0.4467 stg down from 0.4488 stg

92.35 yen down from 93.57 yen

Forex reserves rise by USD 5,474 mn

Forex reserves rose USD 5,474 million to touch USD 281,729 million as on Jan. 11, 2008, primarily as a result of increase in foreign currency and assets collections, on a weekly basis.

As per the weekly statistical supplement of the Reserve Bank of India (RBI) released on Jan. 18, 2008, foreign currency and assets moved up USD 5,473 million to USD 272,964 million.

During the same period, the reserve position in the international monetary fund (IMF) increased by USD 1 million to USD 434 million.

However, SDRs (special drawing rights) and gold reserves remained flat at USD 3 million and USD 8,328 million respectively.

Foreign currency assets expressed in USD include the effect of appreciation or depreciation on non-US currencies (such as Euro, Sterling and Yen) held in reserves.

CIMB forms alliance to boost forex business

CIMB Bank has formed an alliance with ICE Commercial Services Sdn Bhd and Lenlyn UK plc to manage the bank's retail foreign exchange (forex) business.

In a statement yesterday, CIMB said the participation agreement signed with ICE was in line with its efforts to improve customer service at its bureau de change outlets and offer new retail forex offerings in the future.

“Under the agreement, ICE will contribute its specialised expertise and operational and business processes and systems relating to retail forex. It will also assist the bank to develop staff capabilities through tailored training programmes to enhance efficiency and productivity, better customer service and improve delivery systems,” it said.

The bank said it could also leverage on ICE's global brand recognition to attract business, particularly with inbound travellers at the airport and foreign tourists.

CIMB head of retail banking, Peter England, said the partnership would bring significant boost to the business and offer better value to its customers.

“It is an opportune time for us to enhance and expand our retail forex business.”

Rupee at 39.30 against US dollar

The rupee on Thursday barely changed at 39.3050/3150 against the greenback after moving in a narrow range in the day on continued dollar demand by banks amid weakness in equity markets.

The Reserve Bank of India (RBI) continued to intervene in the exchange market to block any surge the rupee in the wake of huge response from foreign investors towards Reliance IPO, forex dealers said.

The foreign institutional investors have submitted bids worth about USD 30 billion for shares of Reliance Power.

At the Interbank Foreign Exchange (forex) market, the local currency remained trapped in a range of 39.2700 and 39.3450 during the day after resuming weak at 39.31/32 a dollar from its previous close of 39.29/30 a dollar.

Dealers said banks bought dollar on behalf of the apex bank but purchases in the greenback were not as aggressive as it was on Wednesday.

Weak stock markets

Weakness in stock markets across the continent coupled with pressure on the currency continued to weigh on the rupee sentiment, they added.

The central bank stepped in when the rupee touched the intra-day high of 39.27 a dollar, a leading dealer commented.

The RBI, however, fixed the reference rate for the US currency at Rs 39.29 per dollar and for the single European unit at Rs 57.60 per euro.

The rupee premiums on forward dollar ended lower due to fresh receivings by exporters.

The benchmark six-month forward dollar premiums payable in June ended at 34-36 paise, slightly lower from 35 – 37 paise on Wednesday and the far-forward maturing in December ended sharply lower at 60 - 62 paise from 66 - 68 previously.

Cross currency trade

In cross-currency trades, the rupee weakened against the British Sterling but was stronger against the euro and the Japanese yen.

The Indian unit fell substantially against the Sterling to end at Rs 77.21/23 per pound from yesterday's close of Rs 76.89/91 per pound but surged against the single European currency to Rs 57.54/56 per euro from last close of 58.05/07 per euro.

The rupee also firmed up against the Japanese Yen to close at Rs 36.69/71 per 100 yen from previous close of Rs 37.01/03 per 100 yen.

Forex reserves up by $5.4 bn

The country's foreign exchange reserves increased by a massive $5.474 billion for the week ended January 11, indicating the Reserve Bank intervened in the forex market by buying dollars to check the rise of rupee.

The reserves increased to $281.729 billion from $276.255 billion a week before, according to RBI data.

Foreign Currency Assets (FCAs) increased by $5.473 billion to $272.964 billion as against $267.491 billion a week ago, as per the Reserve Bank data.

Foreign Currency Assets expressed in US dollar terms included the effect of appreciation or depreciation of other currencies such as the Euro, Pound Sterling and Yen, held in its reserves, it said.

India's reserve position in International Monetary Fund rose by $1 million to $434 million during the week.

Gold reserves and Special Drawing Rights remained static at $8.328 billion and at $3 million respectively.

The rupee has appreciated more than 12 per cent against the dollar in 2007 following massive capital inflows. The Indian currency is trading at a nine-year high against the greenback at around 39.30 to a dollar.

Forex - Dollar slips ahead of Fed's Bernanke Testimony

The dollar slipped against the euro and yen on Thursday ahead of testimony by Fed Chairman Ben Bernanke to the House Budget Committee which is expected to validate the risk of U.S. interest rate cuts already factored in to the market.

Bernanke is due to speak at 10 a.m. (1500 GMT) and investors have priced in at least a half-percentage-point cut in the benchmark U.S. rate this month, with some saying the Federal Reserve could cut rates by three quarters of a point.

Declines in the dollar after a sharp and unexpected fall in U.S. housing starts were short-lived as investors looked beyond housing to an unexpected 21,000 drop in workers filing initial claims for U.S. jobless benefits last week, suggesting some improvement in the labor market. For more see [ID:nN17481155].

"The housing data was bad but you had some counterbalancing because the jobless claims number was better than expected," said Michael Malpede, senior currency strategist at Man Global Research in Chicago. "I don't think anyone will make significant position adjustments until they see what Bernanke has to say ... They want to see just how dovish he may be."

The dollar was down 0.3 percent against the yen at 107.18 . The euro was up 0.1 percent against the dollar at 1.4678 .

The Commerce Department said housing starts fell 14.2 percent to an annual pace of 1.006 million in December, the lowest pace in 16 years. Economists were expecting a 1.140 million annual rate. (Reporting by Nick Olivari and Steven C. Johnson; Editing by James Dalgleish)

Top Forex Trading Tips

* Always practise using a demo account before you go live and start risking your own money. Much like in an online casino, many Forex sites offer ‘fun money’ accounts to newcomers and it’s a good idea to play around with these for a while, until you find your feet and learn the rules of the game. It may take you several weeks or even months until you’re ready to invest your hard-earned cash in the market – but it’s worth waiting.

* Get the knowledge. Aside from practicing on a demo account, it’s essential to read up all you can about Forex gambling. There is a lot of useful information available on the internet, and you might find a user’s guide comes in handy. It’s worth investing in Forex training if you’re serious about making money.

* Keep a cool head. Just like in poker, Forex trading requires a calm personality. Don’t let emotions get the better of you, especially after you have suffered a loss. The best advice is to take a step away from the market, before you go back to gambling.

* Only risk 2 – 3% of your total balance on each Forex trade. This way, you won’t end up losing it all in one go.

* Read the papers. Forex exchange is all about what is happening in the world. Read up on current affairs at home and abroad so you can spot trends and make informed judgments about where the dollar is headed next.

* Look ahead – you can choose to trade in different time windows – hourly, daily or weekly. Always look at the bigger picture before you invest.

* Stick to one pair. Forex trading is about speculating on pairs of currencies, and how they affect each other. If you stick with one pair, you will learn the trends and get a feel for them, which is likely to make you more successful than picking a different currency each time.

* Trading is stressful. Accept that once you’ve made a trade, the result is out of your hands. There’s nothing you can do now. Don’t blame others if you lose – markets go up and down and you take the risk when you enter the Forex exchange. This is also what gives Forex gambling the adrenalin rush that so many people seek.

Forex - Euro falls vs dollar on Mersch

The euro dropped against the dollar on Wednesday after European Central Bank governing council member Yves Mersch told Bloomberg News the central bank may revise down its euro zone growth forecasts for 2008.

"ECB's Mersch is throwing a spanner into the EUR market, highlighting the downside risks to growth and suggesting ECB needs to be flexible with regard to fighting inflation," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "His comments sent EUR/USD down to the overnight lows, which have just broken leading to follow-through selling."

The euro last traded down 1 percent to $1.4662, close to the session low of $1.4645. The euro fell 0.6 percent against the yen to 157.03 .

Dollar/yen rose 0.3 percent to 107.12 . (Reporting by Nick Olivari and Gertrude Chavez-Dreyfuss, Editing by Chizu Nomiyama,)

U.S. Forex Market Commentary

EURO

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4760 level and was capped around the $1.4815 level. Technically, today’s intraday low was just above the 61.8% retracement of the move from $1.4825 to $1.4640. Data released in the U.S. today saw the November trade deficit expand 9.3% to US$ 63.1 billion, its highest level in fourteen months, while the December import price index grew 0% m/m and 10.9% y/y. There is a little market chatter that suggests the FOMC may ease rates by 75bps on 30 January but this is unlikely. Most traders expect the Fed will cut rates by 25bps or 50bps at the end of the month, especially after Chairman Bernanke said the Fed is ready to take “substantive” action. Traders are also talking about a report that Merrill Lynch may announce a larger-than-expected write-down next week for Q4 earnings related to its sub-prime exposure. Also, traders noted Bank of America is purchasing Countrywide – the beleaguered home lending giant – for US$ 4.1 billion in stock. In eurozone news, traders are still talking about the very hawkish comments made by European Central Bank President Trichet yesterday wherein he said the ECB will tighten rates “preemptively” if needed. Euro bids are cited around the US$ 1.4705/ 1.4625 levels.

JPY / CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥108.65 level and was capped around the ¥109.70 level. Technically, today’s intraday low was right around the 61.8% retracement of the move from ¥107.85 to ¥110.10. Bank of Japan Governor Fukui spoke overnight and said weaker housing activity will lead to a weaker economic “for the time being.” Japanese interest rate futures are actually pricing in a 6bps cut in rates over the next twelve months whereas most traders believe the BoJ’s next move in rates is up from the current 0.50% level of the overnight call rate. Data released in Japan overnight saw the December economy watchers’ survey worsen for the ninth consecutive month with the current conditions index declining to 36.6 – its lowest level since January 2003. Also, bank lending by Japanese banks rose 0.2% y/y in December, the smallest rise in nearly two years. The Nikkei 225 stock index lost 1.93% to close at ¥14,110.79. Dollar bids are cited around the ¥108.40 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥160.65 level and was capped around the ¥162.25 level. The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested bids around the ¥212.00 and ¥98.55 levels, respectively. The Chinese yuan appreciated sharply vis-à-vis the U.S. dollar as the greenback closed at CNY 7.2620 in the over-the-counter market, down from CNY 7.2719. PBoC announced China’s foreign reserves topped US$ 1.53 trillion at the end of 2007. It was also reported that China’s trade surplus at the end of 2007 was US$ 262.2 billion, up from US$ 177.47 billion at the end of 2006.

STERLING

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9480 level and was capped around the $1.9635 level. Cable weakened today to its weakest level since 20 March 2007. Data released in the U.K. today saw November industrial production fall 0.1% m/m – below expectations – while manufacturing output was also off 0.1% m/m. These prints incited talk that the manufacturing sector may be headed into recession. Also, the FT reported December house price growth reached its slowest pace since July 2005 in England and Wales. Cable bids are cited around the US$ 1.9260 level. The euro gained marginal ground vis-à-vis the British pound as the single currency tested offers around the ₤0.7585 level and was supported around the ₤0.7535 level.

SWISS

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0975 level and was capped around the CHF 1.1050 level. The pair reached its lowest level since 27 November. U.S. dollar offers are cited around the CHF 1.1125 level. The euro and British pound fell vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6245 and CHF 2.1420 levels, respectively.

Retaled Link :
Forex reserve tops $1.53 trillion
Forex Trading Education - The London Open Checklist

Forex - Dollar falls on weak U.S. retail sales

The dollar extended its declines against the euro and yen on Tuesday after data showed U.S. retail sales for December were below market expectations.

The euro gained against the dollar to $1.4900 from $1.4885 before the data. Against the yen, the dollar extended losses to 107.04 yen , from 107.55 just before. Dollar/yen is now at its lowest since June 2005.

U.S. retail sales fell 0.4 percent last month while markets were expecting no change from November.

Retaled Link :
Forex reserve tops $1.53 trillion
Forex Trading Education - The London Open Checklist

Forex reserve tops $1.53 trillion

China's foreign exchange reserve had reached US$1.53 trillion by the end of 2007, up 43.32 percent from 2006, the People's Bank of China announced on Friday.

A total of US$461.9 billion were added to the country's forex reserve in 2007, said the central bank.

In December alone, the forex reserve rose by US$31.3 billion.

China's forex reserve kept a sharp growth in 2007, reaching US$1.2 trillion by the end of March, US$1.33 trillion by the end of June, and US$1.43 trillion by the end of September.

China's soaring trade surplus is the major contributing factor to the forex reserve boom.

Data newly released by the General Administration of Customs show that China's trade surplus surged to a record US$262.2 billion in 2007, representing a 47.7 percent growth over a year earlier.

The huge forex reserve is considered the main reason for excess liquidity in China, as the central bank has to spend quantities of basic money to purchase foreign exchange, thus aggravating the problem of surplus fluidity.

By the end of 2007, the M2 -- a broad measure of money supply, which indicates the monetary demand of the whole of country and possible inflation -- grew by 16.72 percent from a year ago to 40.34 trillion yuan.

The growth rate is 0.22 percentage points lower than the end of 2006, but still higher than the target growth of 16 percent set by the central bank at the beginning of 2007.

A total amount of 330.3 billion yuan was poured into the market in 2007, 26.2 billion yuan more than 2006.

On the other hand, continuous growth of the forex reserve has in fact increased the pressure on appreciation of the Chinese currency, which in turn has exerted greater pressure on value preservation of China's forex reserve.

Value of Chinese RMB against the US dollars has appreciated by over six percent in 2007. The central parity rate of the RMB was 7.2672 to the US dollar on Friday.

In a move to make better use of the country's huge forex reserve, China established the China Investment Corporate Ltd (CIC), the country's State forex investment company in 2007.

The State-owned investment company will invest in overseas financial markets.

The registered capital of US$200 billion of the CIC all comes from the forex reserve of the country, which have poured into the company so far.