The New Zealand dollar rose against its US counterpart, but fell versus the Japanese yen today after data showed that the nation’s current-account deficit narrowed last quarter. The moves were not big as the market is quiet ahead of the Federal Reserve policy decision.
The New Zealand current-account gap shrank NZ$ 0.3 billion to NZ$ 2.2 billion in the first quarter of 2013 from the previous three months. Still, prospects from additional stimulus from the central bank prevented the kiwi from rallying too much. On top of that, tomorrow’s report is expected to show that economic growth slowed.
NZD/USD rose from 0.7983 to 0.7995 as of 12:04 GMT today. NZD/JPY was down a little from 76.09 to 76.06.
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The Australian dollar rallied against its US peer as the nation’s leading indicators rose, reducing incentive for the Reserve Bank of Australia to cut interest rates further.
The Conference Board Leading Index rose 0.3 percent in April after rising 0.1 percent in the previous month. The Aussie (as the Australian currency is nicknamed) advanced versus the greenback, but remained a bit soft against the yen, showing the same behavior as its New Zealand counterpart. Economists still believe that interest rate cuts are probable, but the positive data suggests that they may be postponed.
AUD/USD went up from 0.9481 to 0.9505 as of 13:15 GMT today following the earlier drop to 0.9432. AUD/JPY was a little lower from 90.38 to 90.30.
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Japanese yen is weaker today, losing ground as the G8 seems to approve the stimulus measures taken on by Japanese policymakers in an attempt to stimulate the economy. As a result, the yen is weakening today, dropping against its major counterparts.
Not too long ago, Japan started an aggressive easing process designed to increase the monetary base and stimulate the Japanese economy, which has been suffering from deflation for about 15 years. Concerns about this policy shift, named “Abenomics” for Prime Minister Shinzo Abe, have been largely ignored by the other members of the G8.
Some have brought up the possibility that Japan’s weak currency could upset global capital flows, since the move could increase Japan’s debt burden. Additionally, there are those that point out that Japan’s weak currency gives the country an edge in global trade.
Japanese policymakers continue to insist that these measures are more about economic stimulus, and not about trade, and this insistence is what allows the G8 countries to avoid castigating the Japanese for their methods. It will be interesting to see whether or not Abenomics will work to kickstart the Japanese economy.
At 13:34 GMT USD/JPY is up to 95.5800 from the open at 94.5070. EUR/JPY is up to 127.6505 from the open at 126.3250. GBP/JPY is up to 148.8905 from the open at 148.5750.
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Canadian dollar is declining against the US dollar for the third day in a row as the Federal Reserve begins its two-day meeting. The expectation that the Fed could begin reducing its asset purchases is lending strength to the greenback against the loonie.
Canadian dollar did get a bit of a boost earlier in anticipation of a speech expected soon from Stephen Poloz, the new governor of the Bank of Canada. However, loonie is losing ground now as Forex traders consider the impact of an improving US economy.
If the Federal Reserve makes an announcement about tapering off its asset purchases, reducing the stimulus efforts because the US economy is on the road to recovery, that means a stronger greenback — and a lower loonie. Right now, Forex traders are considering that possibility.
Traders will also be interested to see what Poloz says, and to gauge what might be next in terms of Bank of Canada policy. The Canadian economy has been flagging a bit, and there is still a housing bubble to worry about. As a result, the loonie’s strength could be waning.
At 14:01 GMT USD/CAD is up to 1.0206 from the open at 1.0185. EUR/CAD is up to 1.3364 from the open at 1.3615. GBP/CAD is down to 1.5931 from the open at 1.6014.
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Earlier today, a member of the European Council proclaimed the euro “safe” and the eurozone economy on the road to recovery. Euro is a little lower against the dollar following this announcement, but this probably has more to do with profit taking after a recent run by the 17-nation currency.
The head of the European Council, Herman van Rompuy, said earlier today that the euro is now safe from the threats caused by the financial crisis and the sovereign debt crisis. Citing a eurozone economy that is expected to improve, van Rompuy insisted that the existential threat against the euro had been dealt with.
Even after the announcement, though, the euro is slightly lower against the US dollar. Part of that is likely due to profit taking. The euro has had a good run recently, breaking through the 1.3300 barrier, and many Forex traders might be deciding that now is a good time to take profits.
Euro is higher against its British counterpart today, and likely to get a little support in general from better risk appetite in the markets.
At 16:16 GMT EUR/USD is down to 1.3333 from the open at 1.3348. EUR/GBP is up to 0.8490 from the open at 0.8485. EUR/JPY is up to 126.4800 from the open at 125.7250.
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The Vietnamese dong was stable today after the central bank said that it had intervened to support the currency that was continuously falling.
The dong was falling as domestic importers were buying dollars. The State Bank of Vietnam said that it intervened “with reasonable volume” to slow the fall and will continue to watch the exchange rate in order to ”flexibly manage money supply channels to control cash flow”. The Vietnamese central banks joined other Asian banks that were attempting to support their currencies, which suffered from risk aversion on the Forex market.
USD/VND traded at 20,975 as of 11:00 GMT today.
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The New Zealand dollar retreated today even though domestic macroeconomic data was rather good and suggested that the economy is faring well.
The BusinessNZ manufacturing Purchasing Managers’ Index rose from 55.2 in April to 59.2 in May. The Food Price Index grew 0.3 percent last month. The New Zealand dollar was rising for three sessions in the previous four days. Currently, the kiwi is trying to erase the drop versus its US counterpart.
NZD/USD fell from 0.8094 to 0.8036 before trading at 0.8088 as of 11:43 GMT today. NZD/JPY dropped from 77.18 to 76.74.
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Euro is struggling today with everything that is happening in the eurozone right now. There’s a great deal of uncertainty, and a lot happening related to bailout efforts and plans to keep the euro solvent.
German arguments before the Federal Constitutional Court pit Angela Merkel‘s government in opposition to the Bundesbank head Jens Weidmann. Merkel is on the side of the ECB’s European Stability Mechanism, and willing to use German taxpayer dollars to bailout other countries through a direct bond buying program. Weidmann is on the side of the thousands of German citizens arguing that this is unacceptable.
The decision in this case likely won’t be handed down until fall.
Another situation that will impact the euro is the Euro Working Group‘s effort to come up with a bank plan that would allow eurozone funds to acquire shares of troubled banks in order to maintain the stability of the banking system — which is likely to become more integrated throughout the eurozone soon.
All of this is contributing to a bit of uncertainty for the euro, and contributing to difficulties today.
At 12:53 GMT EUR/USD is down to 1.3320 from the open at 1.3337. EUR/GBP is down to 0.8497 from the open at 0.8506. EUR/JPY is down to 125.5450 from the open at 128.0635.
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The Chinese yuan fell today as the World Bank reduced its projections for global growth. The previous data from China did not help the currency either.
The World Bank lowered its estimate for this year’s growth of the global economy to 2.2 percent from the previous figure of 2.4 percent. In China, a ”weak 7.7 percent growth” is expected, which should accelerate to 8 percent next year. Morgan Stanley reduced its forecast for China’s growth in 2013 from 8.2 percent to 7.6 percent. Today was the first trading session on China’s markets after the three-day holiday of the Dragon Boat Festival.
USD/CNY rose from 6.1341 to 6.1352 as of 9:53 GMT and its intraday maximum was as high as 6.1507.
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Euro is struggling today, heading lower after the latest industrial production report for the eurozone. Concerns about what’s next for the 17-nation currency are still extent, and that is dragging on performance today.
Eurostat reports that industrial production for the eurozone rose 0.4 per cent in April from the previous month. However, the year-over-year data for April still shows a drop. Additionally, even though the reading surprised to the upside, when the overall production is broken down, it is possible to see a 1.5 per cent drop in energy output and a 2.7 per cent drop for durable consumer goods.
When you get right down to it, there is a reasonable amount of difficulty in the eurozone situation — especially when you factor in record high unemployment and a reluctance by citizens to spend money. Also, with the German courts hearing arguments about the legality of various ECB programs designed to help ease the sovereign debt crisis, there are a number of questions that need to be resolved.
For now, the euro is down against its major counterparts as a result of all this uncertainty.
At 13:45 GMT EUR/USD is down to 1.3304 from the open at 1.3315. EUR/GBP is down to 0.8491 from the open at 0.8510. EUR/JPY is down to 128.0380 from the open at 127.8850.
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