Market News

During the G7 meeting in Washington yesterday investors were under the impression that group will intervene in the foreign exchange market to stabilize the U.S. Dollar. However, shortly after the meeting it became clear on Monday, April 14, 2008 that no concerted effort would be taken by the G7 to prop up the U.S. Dollar, and as a result investors moved out of the Dollar and into other currencies.

Following the decision by the (ECB to keep interest rates unchanged at 4%, the U.S. Dollar fell against major currencies. On April 12, 2008 at 10:50 am (00:50 GMT) in Sydney, the Euro traded at $1.5763 compared to $1.5742 while the U.S. Dollar traded at 101.88 Yen compared to 101.95 Yen in late trading in New York.

Traders in the forex markets are anxiously waiting for today’s interest rate decisions by the Bank of England (BoE) and the European Central Bank (ECB). They expect the ECB to hold interest rates steady, at the current level of 4%, while the BoE is expected to reduce interest rates to 5% in order to address the liquidity crisis facing financial institutions.

Finance ministers from Japan and other Euro Zone countries are gathering for the upcoming G7 meeting schedule for next week. The finance ministers seek to put a halt to excessive foreign exchange movements, resulted from growing concerns over the U.S. economy and the ever weakening U.S. Dollar, in the wake of the sub-prime crisis. Last month, the U.S. dollar fell to its lowest level in 13 years against the Yen, and at one point, closed at a historical low of $1.5906 versus the Euro.

On Friday, April 4, 2008, in Singapore the U.S. Dollar was steady against major currencies, as traders anxiously await the release of March job data later expected to be released later today in the United States. Many economists predict that non-farm jobs will drop by at least 50% and that the unemployment rate will be 5% compared to 63,000 job losses reported in February and an unemployment rate of 4.8%. According to recent data, the weekly jobless claims increased by 407,000, which is a two year high. This increase suggests greater job losses than expected.

Following the release of data on U.S. job market which showed that employers shared more than expected jobs in March, the U.S. Dollar fell against major currencies. The data released showed that the economy lost about 80,000 jobs, the largest monthly decline in five years. This is the third consecutive job loss which confirms investors’ fears that the U.S. economy is in recession.

On Wednesday April 2, 2008, the Chairman of the Federal Reserve Bank hinted that the United States economy may beheading towards recession in the first half of the year, but will rebound in the second half through 2009. Despite this news, the U.S. Dollar firmed following good news coming from the labor market, which said that private sector jobs increased in March 2008 by 8,000 compared to 70,000 loss originally expected by economists.

Late Tuesday, April 1, 2008, the U.S. Dollar showed slight gains, based partly on the news that Lehman Brothers Holding and UBS Switzerland have issued new shares to support their balance sheets. The offerings by these two investment banks were well received by investors. In addition, the U.S. Dollar was helped by better-than-expected data released by the Institute of Supply Management, which shows that the U.S. manufacturing sector index rose from 48.3 for the month of February to 48.6 for the month of March, which is better than the expected decline to 47.5.

Investors in Asia are speculative that the European Commercial Bank will not cut interest rates because of the rise in inflation, and as a result, the U.S. Dollar weakened in Asian markets on Tuesday, March 31, 2008. According to reports, consumer prices in the Euro Zone increased by 3.5% in March, which is significantly higher than the 2% target set by the European Commercial Bank. This increase is also the highest in 15 years and it confirms investors’ speculation that the European Commercial Bank will hold interest rates steady.

On March 31, 2008, in early trading in Sydney, the U.S. Dollar was mixed against most major currencies, however, traders believe that pressure will continue to mount on the U.S. Dollar until investors are confident that the liquidity crisis and the U.S. economy improves.

For some time, investors have been speculating that the European Central Bank (ECB) will need to increase interest rates due to a steady increase in inflation in the Euro Zone. This speculation was confirmed by comments made by Axel Weber, a member of the ECB. He said, “interest rates may need to be raised to contain ‘alarming’ prices.” As a result of these comments, the European 2-year Government Securities dropped.

On Friday, March 28, 2008, the Japanese Yen continue to strengthen against the U.S. Dollar because investors are concerned that the liquidity crisis in the U.S. financial market will not be over soon. Consequently, U.S. stocks, especially the financial shares, fell and the U.S. dollar dropped by 0.4% to 99.11 yen.

The U.S. Dollar continues to fall against major currencies in Asian trading this Friday, following the release of Japanese Consumer Price Index data for the month of February. On March 28, 2008, at 00:15 GMT in Sydney, the U.S. Dollar traded at 99.54 yen, compared to 99.68 yen late in New York on Thursday, while the Euro traded at $1.5808 compared to $1.5774 in late New York trading

The U.S. Dollar continued its fall against the yen in early trading on March 27, 2008 in Tokyo, after the release of poor economic data, which confirms the poor state of the U.S. economy. According to the U.S. Commerce Department, new durable goods orders decreased by 1.7%, which was worse than the increase of 0.7% which had been anticipated by economists. Also, reports on new house purchases fell by 1.8% in February 2008.

The U.S Dollar continues to fall against the Yen, after it was announced that last month’s exports from Japan grew faster than that of the previous month, even though the U.S. economy continues to falter. According to the report, although the U.S. economy is in a slump, exports from Japan grew 8.75% in February compared to 7.6% in January.