Dollar Rebounds on Undervaluing Speculations

The U.S. dollar had a weak performance this week reaching record lows versus the euro and the Australian dollar but managed to pare some of its losses as traders could think the current devaluation may be too severe and that it would not reflect economic fundamentals in the U.S.

The greenback managed to gain versus most of the 16 main traded currencies towards the end of this week’s session, in a movement that many analysts considered to be a corrective, profit taking from a part of traders, but at the same time could indicate a shift in the dollar trends, as fundamentals in the country are not so negative as the sentiment towards the currency.

EUR/USD closed this week at 1.4904 after touching 1.4963 during the week.

Will Australia Raise Interest Rates?

The Australian dollar, together with its New Zealand counterpart are among the best performing currencies in foreign-exchange markets in 2009 after evidences pointed the resilience of South Pacific countries to recover from the crisis, attracting worldwide investors to the region.

This was the second week straight of gains for the Australian dollar versus the greenback and most of the 16 main traded currencies after Reserve Bank of Australia Governor Glenn Stevens suggested that borrowing costs in the country may be subject to elevations towards the end of the year, attracting traders to inject money in the country, since higher interest rates provide higher profit possibilities for investors. New Zealand is likely to be the second country to raise interest rates among the wealthiest nations in the world, adding attractiveness for the South Pacific region, which has also benefited from a higher demand for raw materials as the global economy improves, taking into account that most of Australian exports are commodities to China.

After the declarations coming from the central bank in Australia the Aussie found support to remain at high level, and even with a corrective movement towards the end of this week’s session, most of analysts bet in a strong Australian dollar towards the end of the year.

AUD/USD closed the week at 0.9162 after hitting the highest level in more than a year during the week at 0.9270.

Australian Dollar Trades Near 2009 Record High

After falling from the highest level in more than 14 months towards the end of last week’s session in a day of bearish performance in stock markets, the Australian dollar started this week climbing once again on speculations regarding increased interest rates in the country.

The Australian dollar together with its New Zealand counterpart rebounded from a corrective movement Friday as stocks rose adding confidence that interest rates in the South Pacific region will return to pre-crisis levels gradually, after a Reserve Bank of Australia official affirmed that interest rates in the country are due to move towards normality, suggesting that record low levels will be lifted as soon as the economic conditions provide support for elevating borrowing costs in Australia, fact which is fueling an intense rally in South Pacific currencies, setting the Aussie and the kiwi among the 3 top performers in foreign-exchange markets, together with the Brazilian real, originated as well from a commodity exporter country.

The renewed risk appetite that fueled stocks in Asia also brought investors back to the Australian dollar-priced assets, suggesting that the Aussie is likely to remain at very high-levels towards the end of the year, as more than one rate hike is expected from the central bank in that nation for the following months.

AUD/USD traded at 0.9211 as of 13:11 GMT from an opening rate yesterday of 0.9144. AUD/JPY traded at 83.65 from 83.05.

Crude Oil Record High Helps Russian Ruble to Gain

Russia is the main energy supplier to Europe, and this week, as the crude oil continued to extend gains reaching the highest values since it tumbled last year after the global slump, the ruble is gaining, as demand for Russian natural resources are influencing the national currency positively.

The Russian ruble is leading gains among emergent market currencies today after the crude oil touched $79 a barrel, fact which is extremely favorable to the biggest country in the world since oil is its main export product. JPMorgan Chase & Co. stated that Russian stocks are more appealing in the current global economic scenario, creating attractive conditions in Moscow equities market, posting a significant rise today. Russian stocks remain the best performing globally in 2009 as the crude oil rates more than doubled since the beginning of the year, attracting investors to Russia, which had suffered one of the biggest impacts among global powers, mainly in its financial sector.

The Russian ruble, which has its fluctuations controlled by the Bank of Russia, is witnessing better rates due to injection of foreign capital in Russian stock markets, as well as the increased demand for Russian exports provides support for the national currency to gain. As long as the crude oil rates continue to rise, the Russian currency is likely to remain strong.

USD/RUB traded at 29.30 as of 14:17 GMT from an opening rate of 29.43 today.

Euro hits 14-month high vs US dollar

The 16-nation euro hit a new 14-month high against the dollar on Wednesday as traders prepared for US economic data and minutes of the latest Federal Reserve meeting.

The euro traded at $1.4901 (R10.85) in morning European trading, up from $1.4829 in New York late the day before. That was the highest the euro has traded since Aug. 14, 2008, when it traded as high as $1.4949.

The British pound rose to $1.5958 from $1.5901, while the dollar slipped to 89.18 Japanese yen from 89.76 yen.

Traders were looking ahead to the release later in the day of the minutes of the US Federal Reserve's latest interest rates meeting.

American rates are currently at historical lows of near zero, and traders were hoping for clues as to how long they may be held down.

Raising interest rates can boost a currency, as the higher yields make it more attractive to investors.

Traders were also awaiting a report on US retail sales for any indication about the strength of the American economy

Dollar Climbs on Grim Economic Forecasts

The dollar kept its previous days trend gaining versus the euro and high-yielding currencies as forecasts suggest that loan defaults and unemployment rates will keep deteriorating, raising risk aversion and adding attractiveness for the safe profile of the greenback.

An expected rise in unemployment figures, and a still very complicated credit situation in the United States rose concerns among traders regarding the economic recovery in North America and consequently in a global dimension, slashing earlier gains this week for higher-yielding currencies and favoring currencies with a relative safe profile, as the U.S. dollar and the yen. The dollar is likely to end today’s session setting a second week of gains versus the euro, as the current strength of the Eurozone currency is already raising policy makers concerns, as it decreases competitiveness for European products and could slow down the economic rebound in the region.

A negative day in stocks and commodities while market sentiment impacted by U.S. employment figures and the Group of 7 meeting which may approach sensitive topics are providing support for the dollar tor remain strong in the short-term at least. If concerns regarding a strong euro be confirmed in the G-7 meeting, the dollar may extend gains versus the euro during the next week.

EUR/USD traded at 1.4543 as of 9:47 GMT from a previous rate of 1.4565 yesterday. USD/CAD traded at 1.0894 from 1.0747.

If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Pounds Ends Another Week Down on Crisis Concerns

The pound has been one of the most affected currencies by the credit crunch last year and during the past three weeks it suffered another substantial decline as the U.K. economic scenario continues to deteriorate and this Friday risk aversion is high again pushing investors towards safety.

Today the British currency found obstacles to climb in both domestic and international economy scenarios, as risk aversion rose globally. Nationwide Building Society indicated today a worse than previous forecast for house prices increase in the U.K., raising concerns on the real estate market which was one of the most impacted by the global slump last year, especially in England. Equities markets in the U.K. and overseas also had a negative day before a G-7 meeting which may approach sensitive topics regarding the economic future in the world’s wealthiest nations, forcing investors to opt for safer assets and damping demand even further for the U.K. pound.

The situation in the U.K. and the current problematic market sentiment make of the British pound one of the worse bets available in foreign-exchange markets, as Bank of England’s inefficiency to cope with financial problems in the country becomes more evident by the day, damping demand for the British currency which is likely to remain unattractive for a while.

GBP/USD traded at 1.5851 as of 10:49 GMT from a previous rate of 1.5966. EUR/GBP traded at 0.9173 from 0.9109.

If you want to comment on the Great Britain pound’s recent action or have any questions regarding this currency, please, feel free to reply below.