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Forex News 2/22 Forex - Dollar selling continues; euro breaks above 1.32 usd mark LONDON (AFX) - Dollar selling continued into the afternoon, with the euro breaking through the 1.32 usd mark for the first time in over five weeks
The selling was sparked in Asian trade overnight after reports yesterday that the Korean central bank plans to diversify its reserves away from the US dollar. A spokesman for the Bank of Korea was quoted as saying in a report to parliament that as foreign exchange reserves increase, the central bank "will expand its investment into non-government papers, which carry relatively high yields, and diversify the currencies in which it invests"
The Korean won fell to eight-month highs against the dollar, while major currencies also posted strong gains, with the dollar dropping briefly below 104 yen and the pound moving above 1.91 usd for the first time since the beginning of this year
"The Korean story is significant because we haven't really heard anything quite as definitive up till now from any of the Asian countries that maintain large reserves -- there have been suspicions but there has been nothing that concrete in terms of intention," said Bear Stearns currency analyst Steve Barrow
"At a time when the market thought there was not much going on, this has sparked some interest and some movement," he added
Analysts also noted that thin trading due to the US holiday yesterday provided dollar bears with an opportunity to push the currency lower and caused more exaggerated movements as the euro broke through resistance levels
Barrow said the US currency's failure to outperform last week on the back of some very dollar-positive news "seemed to suggest that sentiment was turning against the dollar"
News
2/21 Forex - Major currencies stay little changed ahead of busy week for data LONDON
(AFX) - Major currencies continued to trade within very tight ranges as investors stayed on the sidelines ahead of a heavy week for data and with US markets closed for the Presidents' Day holiday today
Market focus this week will centre on the release on Wednesday of US inflation data and the minutes from the Federal Open Market Committee meeting earlier this month
Though the dollar remains weak, analysts believe the currency will rebound towards the end of the week, particularly if the inflation figures reflect last week's huge surge in US producer prices. "If the higher PPI translates into a higher CPI, markets will conclude that the Fed will increase the pace of interest rates hikes," BNP Paribas analysts said
In the FOMC's minutes, released on Wednesday evening, market players will also be looking for discussion about the possibility of dropping the word "measured" to describe the pace of rate hikes
Aside from the inflation data and FOMC minutes, fourth-quarter GDP on Friday is expected to see a substantial upward revision, while US Treasury yields are set to continue rising, all providing a potential boost for the dollar
"The time may be approaching for a reversal (for the euro/dollar rate), particularly later in the week when US data is likely to favour the dollar," CALYON currency analyst Daragh Maher said
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