currency trading reviews august 4 2011, Currency Intervention Revived as Odds Escalate Fed to Ease ; Just eight months ago, Brazilian Finance Minister Guido Mantega declared a "truce" in competitive currency devaluations. Now, Japanese and Swiss moves to weaken the yen and the franc show reviving tension in foreign-exchange markets as the deteriorating U.S. economy weighs on the dollar.
Japan sold yen today, causing the currency to weaken as much as 3.8 percent against the dollar after rising 5 percent last month. "Ongoing one-sided moves" would hurt the recovery from a March earthquake, Finance Minister Yoshihiko Noda said. Yesterday, the Swiss National Bank cut interest rates to rein in the franc after a gain of about 36 percent in the past 12 months.
Europe's sovereign debt crisis and the battle between Republican leaders and U.S. President Barack Obama over the budget and borrowing limits drove investors to the perceived safety of yen and francs. The risk of a U.S. return to recession, forcing the Federal Reserve to another round of monetary easing, has exacerbated dollar weakness. The currency's drop last year left all of Asia's 10 biggest economies seeking to influence their own exchange rates to aid exporters and growth.
"We seem to be entering a new stage of the currency wars where it's not just the emerging markets that are responding to broad dollar weakness," said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore, who has written books on currency markets. "Expect much more intervention in the future and further acrimony in terms of how the U.S. dollar is doing."
Turkey's Move
Turkey's lira fell 1.1 percent to 1.7129 per dollar at 12:08 p.m. in Istanbul today after the central bank cut a key interest rate.
In the U.S., the economy shows signs of slowing, say five of nine economists on the academic panel that dates recessions. Harvard University economics professor Martin Feldstein, a member of the Business Cycle Dating Committee of the National Bureau of Economic Research, sees a 50 percent chance of another recession.
A government report tomorrow may show the unemployment rate held at 9.2 percent in July, according to the median forecast in a Bloomberg survey, up from 8.8 percent in March. Barclays Capital economists cited "QE3 speculation picking up" ahead of the Fed's Aug. 9 policy meeting, referring to a third round of quantitative easing, where the Fed mounts asset purchases.
Dollar, Euro
Among the 16 major currencies, the Swiss franc, New Zealand dollar, yen, Brazil's real and the Singaporean dollar have gained the most against the U.S. currency in the past three months, according to data compiled by Bloomberg. The euro has tumbled more than 3 percent against the greenback.
The yen fell 3.5 percent to 79.84 per dollar as of 5:44 p.m. local time, close to the 80 level that Toyota Motor Corp. used for forecasting profit this fiscal year. The Swiss franc fell 1.1 percent against the dollar to 77.87 centimes as of 9:03 a.m. in London.
Brazil's Mantega said Nov. 30 that his nation's currency was trading at a reasonable level as Europe's worsening crisis brought a "temporary truce" to a currency war. Since then, the real has gained about 10 percent against the dollar, and Mantega said last month that the so-called war was still on.
Shielding Economies
Brazil buys dollars to limit gains in the real and has also introduced rules aimed at discouraging bets on dollar weakness. The South American nation said on Aug. 2 that it will provide $16 billion in tax breaks and toughen trade barriers to protect manufacturers hurt by a currency rally that's fueling a surge in imports from China.
Latin American finance officials plan to gather this month in Buenos Aires to discuss ways to protect their currencies and economies from the turmoil in the U.S. and Europe.
Japan sold yen today, causing the currency to weaken as much as 3.8 percent against the dollar after rising 5 percent last month. "Ongoing one-sided moves" would hurt the recovery from a March earthquake, Finance Minister Yoshihiko Noda said. Yesterday, the Swiss National Bank cut interest rates to rein in the franc after a gain of about 36 percent in the past 12 months.
Europe's sovereign debt crisis and the battle between Republican leaders and U.S. President Barack Obama over the budget and borrowing limits drove investors to the perceived safety of yen and francs. The risk of a U.S. return to recession, forcing the Federal Reserve to another round of monetary easing, has exacerbated dollar weakness. The currency's drop last year left all of Asia's 10 biggest economies seeking to influence their own exchange rates to aid exporters and growth.
"We seem to be entering a new stage of the currency wars where it's not just the emerging markets that are responding to broad dollar weakness," said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore, who has written books on currency markets. "Expect much more intervention in the future and further acrimony in terms of how the U.S. dollar is doing."
Turkey's Move
Turkey's lira fell 1.1 percent to 1.7129 per dollar at 12:08 p.m. in Istanbul today after the central bank cut a key interest rate.
In the U.S., the economy shows signs of slowing, say five of nine economists on the academic panel that dates recessions. Harvard University economics professor Martin Feldstein, a member of the Business Cycle Dating Committee of the National Bureau of Economic Research, sees a 50 percent chance of another recession.
A government report tomorrow may show the unemployment rate held at 9.2 percent in July, according to the median forecast in a Bloomberg survey, up from 8.8 percent in March. Barclays Capital economists cited "QE3 speculation picking up" ahead of the Fed's Aug. 9 policy meeting, referring to a third round of quantitative easing, where the Fed mounts asset purchases.
Dollar, Euro
Among the 16 major currencies, the Swiss franc, New Zealand dollar, yen, Brazil's real and the Singaporean dollar have gained the most against the U.S. currency in the past three months, according to data compiled by Bloomberg. The euro has tumbled more than 3 percent against the greenback.
The yen fell 3.5 percent to 79.84 per dollar as of 5:44 p.m. local time, close to the 80 level that Toyota Motor Corp. used for forecasting profit this fiscal year. The Swiss franc fell 1.1 percent against the dollar to 77.87 centimes as of 9:03 a.m. in London.
Brazil's Mantega said Nov. 30 that his nation's currency was trading at a reasonable level as Europe's worsening crisis brought a "temporary truce" to a currency war. Since then, the real has gained about 10 percent against the dollar, and Mantega said last month that the so-called war was still on.
Shielding Economies
Brazil buys dollars to limit gains in the real and has also introduced rules aimed at discouraging bets on dollar weakness. The South American nation said on Aug. 2 that it will provide $16 billion in tax breaks and toughen trade barriers to protect manufacturers hurt by a currency rally that's fueling a surge in imports from China.
Latin American finance officials plan to gather this month in Buenos Aires to discuss ways to protect their currencies and economies from the turmoil in the U.S. and Europe.
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