Pound Pares Losses After Exaggerated Rally

The pound reverted its losing trend from last week’s end, specially versus the euro, as traders interpreted the winning streak as inadequate, as U.K. could be starting its first signs of economic recovery.

The pound has been facing extreme volatility as investors remain confused regarding the directions it may take in currency markets, considering the actual conjecture of the British financial scenario. Today, the pound rose specially versus the euro, as even if the U.K. posted negative growth numbers last week, analysts suggest that next quarter will bring back optimism towards the United Kingdom’s economy.

EUR/GBP traded at 0.9109 as of 21:45 GMT from a previous rate of 0.9235 yesterday.

Yen Trading Higher as Stocks Tumble

The Japanese currency ranked among the best performers in currency markets after several days of losses as stocks declined worldwide, attracting traders to the safety provided by yen-priced assets, and favoring also safer bets in financial markets globally.

The South Korean won was one of the biggest losers versus the yen after climbing sharply due to a report showing a significant quarterly growth for the Asian emergent nation, in a movement that can be understood as a correction by traders. One of the biggest winners today, but still losing against the Japanese currency was the Australian dollar, that benefited from side effects of a Chinese official statement suggesting that industrial production is growing massively in the country, which is good for the South Pacific nation since Australia is a major provider of commodities to China. The Swedish krona also lost significantly versus the yen as the country is still suffering from central bank statements last week that affirmed that interest rates will remain low until next year.

Most analysts concord that financial markets are having a moment of correction this week after stocks and higher-yielding currencies touched the highest levels in 2009 last week. Even if this Tuesday is producing rather negative numbers, most of traders are still expecting gains in riskier assets towards the end of the year.

EUR/JPY traded at 136.47 as of 14:00 GMT from a previous rate of 138.49 in the intraday. GBP/JPY traded near stability at 150.35.

Canadian Dollar Strengthens on Decline Speculations

The Canadian dollar had the first session of recovery versus the greenback and several other major currencies after traders speculated that the current losing streak was not reflecting the present status of the Canadian economy, which is being one of the most resilient among wealthy nations.

Even if Bank of Canada policy makers are constantly stressing on the fact that loonie rates should go down to ensure a fast recovery for the Canadian economy, the loonie gained today after several days of negative performance, after investors interpreted BOC statements as not-so-relevant compared to fundamental data regarding the Canadian economy during the past quarter, which is indicating a solid and resilient economy. The loonie gained today versus almost all major traded currencies except the yen, which gained significantly as investors opted for safety in a day of bearish performance in equities and commodities markets.

Analysts agree that even if policy makers are affecting the loonie’s perform in the short-term, the sentiment towards the Canadian currency remains very positive, as it’s back by crude oil rates, one of the main Canadian exports to the U.S., as also on the North American national economic fundamentals, which are better than most economic regions throughout the world.

USD/CAD traded at 1.0647 as of 20:43 GMT from 1.0716 hours earlier

Sweden’s Krona Down Further on Economic Outlook

The Swedish currency has been one of the biggest losers in the European currency market as producer prices declined again in September, raising concerns towards the economic recovery in the country.

Since Riksbank affirmed that interest rates in Sweden will continue at record low levels to stimulate the economic growth in the Nordic country, the krona has been having negative sessions which aggravated today after producer prices fell in September, evidencing the fragility of the Swedish economy.

USD/SEK closed today at 6.9705 from an opening rate of 6.8691.

Pound Extends Gains on Retail Sales

Speculations that retail sales would post another month of gains were confirmed providing support for the pound to regain terrain versus the euro and several other currencies, changing the negative outlook for the British currency to a better trajectory.

The pound gained versus most of 16 traded currencies as retail sales in the U.K. touched the highest level in 2 years in October, bringing confidence back towards pound-priced assets, after rather turbulent weeks that shunned away investors from the British currency in foreign-exchange markets.

EUR/GBP traded at 0.9039 as of 21:36 GMT from a previous rate of 0.9118 in the intraday.

Canadian Dollar Down Another Day on Stocks

This week is being one of the most negative for the Canadian currency in months, as stocks and commodities declined significantly, and considering the loonie one of the most influenced currencies by these movements, today’s drop set the Canadian currency to the lowest level in 3 weeks versus the greenback.

The Canadian dollar posted a decline versus more than half of 16 main traded currencies today as stocks and commodities faltered once again around the world as risk aversion rose after a U.S. home sales report that indicated an unexpected fall in its monthly figures for September, affecting the higher-yielding Canadian dollar profile as traders return to the safety of its U.S. counterpart. A part from volatility in financial markets, the Canadian dollar has been affected by a downturn in its sentiment as the Bank of Canada has been repeatedly affirming that a strong currency is unwanted for the economic moment the nation is passing through, as its economy need to recover, and a weaker currency can promote this process more quickly.

The sentiment regarding the Canadian currency suffered a huge shift after the national central bank started to stress on the fact that a strong rally for the loonie would be halted by policy makers, shunning risk seeking investors from assets in Canada towards commodity linked currencies in other global economic regions, which set the loonie to the worst rate in weeks this Wednesday.

CAD Slumps on BoC by Korman Tam

10/20/2009 2:40 PM: EUR/$..1.4928 $/JPY..90.71 GBP/$..1.6366 $/CHF..1.0124 AUD/$..0.9221 $/CAD..1.0488 CAD Slumps on BoC by Korman Tam The dollar was mixed in the Tuesday session, climbing sharply higher against the Canadian dollar past the 1.05-figure while sliding versus the euro just shy of the 1.50-level. The US economic reports released earlier today were largely disappointing. The September housing starts figure missed consensus estimates for an increase to 610k units from 598k units, instead dropping to 590k units. The September building permits reading also disappointed, falling to 573k units versus 580k units a month earlier. Meanwhile, the headline PPI figures for September were weaker than anticipated, declining by 0.6% m/m and 4.8% y/y. The core PPI readings also missed forecasts, declining by 0.1% m/m and edging up by 1.8% on an annualized basis. BoC Unchanged, Drags Canadian Dollar Lower The Bank of Canada left interest rates unchanged at 0.25% when it announced its monetary policy decision earlier in the session. Although the BoC sounded an optimistic tone in its subsequent policy statement, acknowledging that “a recovery in economic activity is under way in Canada”, it cautioned that “heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures”. Further, the Bank said “the current strength in the dollar is expected, over time, to more than offset the favorable developments since July”.

Dollar Tumbles to Fresh 14-mth Lows by Korman Tam

The dollar sold off sharply across the board in the Wednesday session despite a dearth of US economic data earlier in the morning. The greenback plunged to a fresh 14-month low against the euro past the psychologically key 1.50-level to 1.5040, a new 15-month low versus the Swiss franc at 1.0038 and 14-month low against the Australian dollar at 0.9326. A shift into riskier assets continues to be detrimental for the US dollars as traders price in improving conditions in the global economy. Crude oil prices climbed higher today, rallying above the $81 per barrel level by afternoon trading.

The Fed’s Beige Book provided an optimistic assessment of the US economy, saying conditions have stabilized or improved modestly in many sectors since its last report. The Fed said that reports of gains in economic activity outnumber the declines, though the improvements are small and scattered. However, it tempered its assessment by saying adding that labor markets are typically characterized as weak or mixed, albeit with pockets of improvement.

The economic calendar for Thursday will see weekly jobless claims, August home prices and the September leading economic indicators index. Weekly jobless claims are estimated to edge up slightly to 515k from 514k in the previous week. Meanwhile, the leading economic indicators index is forecasted to improve to 0.80% from 0.60% in August.

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