Forex Fundamental Analysis
The Yen has acquired the status of being a safe haven currency in the current turbulent forex marketplace. Since the Bank of Japan is maintaining a zero percent interest rate, investors in the Yen are gaining from the strengthening of the currency and see only minimal return on their holdings.
Figures released by the Chinese Federation of logistics and Purchasing (CFLP) from their Purchasing Manager’s Index (PMI) show that the sector has grown in August after four successive months of decline.
Figures released by the Finance Ministry indicate that the Indian economy is slowing, but even so, the slower rate of 7.7% would have most major economies green with envy. So, one would assume, all is rosy in the world’s most populace democracy, then? Hardly so, unfortunately.
With the resignation of Prime Minister Naoto Kan last week, the ruling Democratic Party of Japan has had to find a new leader. A number of candidates had let their names go forward to the first round of the election with the early favourite being the former foreign minister, Seiji Maehara. However, Mr Maehara was eliminated after the first round.
All the world’s markets ended the week higher as optimism and bargain hunting returned to markets. In Europe over the course of the week, the FTSE made 1.8% and closed at 5129.9; the Dax rose by 1.1% to close at 5537.5%; the CAC climbed by 2.3% to end the session at 3087.6.
Gold has always been regarded as the ultimate safe haven when economic storms are raging. The rise in its value can be attributed to the general nervousness, but also, perversely, because of a fear that the US Dollar is depreciating. Gold is priced in Dollars, so as the value of the currency falls, the value of gold rises, providing a nifty hedge against currency depreciation.
Like almost all of the major economies, France has its own debt crisis. The current account deficit stands at 5.7% which is almost twice the Eurozone convergence requirement of 3%.
After Standard and Poor’s reduction of the credit rating on the world’s largest economy, the USA, fellow ratings agency Moody’s has moved to downgrade the credit rating for the world’s third largest economy, Japan.
On a tour to China, US Vice President, Joe Biden, promised his hosts that the world’s largest economy would never default on its debts. Why is it unthinkable that the Americans should become unable to pay their debts?
The U.S. Dollar closed last week lower by 0.63% after Philadelphia Fed survey which plummeted to -30.7 vs the expected 4.0. End of week Jackson Hole Symposium will determine Greenback's fate for 2011.
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