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Foreign Exchange (Forex) Trading is a nonstop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets while traders increase or decrease value of an investment upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events on line trading

Tuesday, October 04, 2005

Dollar slips but poised near highs

By Eric Burroughs

TOKYO, Oct 5 (Reuters) - The dollar slipped on Wednesday but held near a three-month high against the euro and a 16-month peak versus against the yen as more Federal Reserve officials made clear U.S. interest rates are heading even higher.

Philadelphia Fed President Anthony Santomero was the last of three policymakers to signal on Tuesday the central bank's plans to tighten monetary policy further, saying the Fed was somewhat more worried about inflation compared with a year ago.

Dallas Fed President Richard Fisher said core consumer price inflation was running at the upper end of the Fed's tolerance zone and "shows little inclination to go in the other direction".

The array of Fed remarks signaling that its 15-month credit tightening campaign is not yet close to finishing has revived the U.S. currency's rally this year by heightening the allure of dollar deposits and yields.

Profit-taking pushed the dollar slightly lower after the U.S. currency had trouble extending big gains from earlier in the week, stymied against the euro at $1.19 and versus the Japanese currency near 114.50 yen.

Analysts said the Fed's vocal campaign of declaring its intention to stamp out any building inflationary pressures was boosting investors' faith in the dollar.

"What matters for currencies are expectations of inflation," said currency strategists at JPMorgan Chase in a note to clients.

"So far this week, hawkish comments by the Fed have managed to control these worries, suggesting that investors have become more confident that the Fed will hike rates enough to slow down the economy and control future inflation," they said.

The euro bought $1.1935, after it fell to a fresh three-month low of $1.1900 on Tuesday on electronic trading platform EBS.

So far the single currency has withstood attempts to take out suspected stop-loss orders at $1.19, which to some analysts suggests that speculators may be poised to reverse their bets for a deeper euro slide.

One trader at a European investment bank said the dollar was poised for a correction and that equity portfolio managers were good euro buyers on any drop. The FTSEurofirst 300 share index has scaled 3-1/2-year highs this week.

Against the yen, the dollar was down 0.3 percent to 113.85 yen after having climbed to around 114.40 yen, the highest level since late-May 2004.

Repeated dollar selling from Japanese exporters repatriating overseas profits has blocked the currency's advance, traders said.


The yen has suffered from hungry investor demand in Japan for mutual funds offering higher-yielding foreign bonds, helping drive it to eight-year lows against the New Zealand dollar and near seven-year troughs versus the Australian dollar.

Investors widely expect the Fed to raise its funds rate to 4 percent or 4.25 percent by the end of this year from the current 3.75 percent, and expectations have mounted for more such tightening next year.

The Fed has repeated that the current accommodative policy needs to be removed at a "measured" pace and aims to take rates to a neutral level that neither hinders nor spurs growth.

Steady rate increases from the Fed have contrasted with the euro zone and Japan, where overnight rates have been stuck at 2 percent and virtually zero percent. Rising U.S. rates have also eroded the appeal of higher-yielding currencies, such as the Australian and New Zealand dollars and the British pound.

Fed policy tightening has been the main driver behind the dollar's gains so far this year, pushing the greenback up about 14 percent against the euro and Swiss franc and 11 percent versus the yen.

source: reuters

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Thursday, September 29, 2005

Strike hits early trade in forex market

Thursday, 29 September , 2005, 11:43

Mumbai: Early trade was adversely affected at the Interbank Foreign Exchange market here today due to the nation-wide one day industrial strike after the bulk of bank employees joined a slew of unions to protest the Centre’s privatisation policy.

Airport employees scale down strike duration from 24 to 12 hours Most air services to be normal

Strike: Air force personnel man airports

In thin dealing at the Forex spot market, the rupee was quoted at Rs 44.0250/0350 per dollar in late morning deals, higher from Wednesday’s close of Rs 44.0350/0450 per dollar following a strong opening slot of Rs 44.0150/0250.

In subdued business, mainly confined to a few foreign and private banks, the rupee rallied mildly on the back of steady FII inflows and receding dollar demand, a forex dealer said.

However, a fresh rise in crude oil prices could weigh on rupee value, he added.

World crude oil prices rose to $ 66.44 a barrel in early Asian trade today due to signs that US supplies would plunge.

Having absorbed most of the month-end dollar demand in the last three session, the rupee today rallied on sustained FII inflows into the equity market, another dealer said. Today in Sify Finance

Sabarimala pilgrims rejoice!
The Kerala Govt along with IL&FS has finally embarked on a Rs 1000 cr facelift for

Left-wing trade union have called a nation-wide strike today against the government’s privatisation policy wherein major bank unions have supported the strike, adversely affecting transactions in the Forex spot market.

In Cross Currency Trade, the Euro was quoted at Rs 53.12/15, Pound Sterling at Rs 77.89/91 and the Japanese Yen (100) at Rs 38.96/99.

source: reuters

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Sunday, September 25, 2005

Dollar hits 2-month high on Rita relief

By Hideyuki Sano

TOKYO, Sept 26 (Reuters) -The dollar hit a two-month high against the euro on Monday after Hurricane Rita caused less damage than feared, driving oil prices lower and reinforcing expectations the Federal Reserve will keep raising interest rates.

Rita spared Texas oil refineries, pushing oil prices lower and alleviating worries that lofty energy costs could eat into U.S. consumer spending.

"With the outlook for rising U.S. rates unchanged, the bullish sentiment for the dollar is intact," said Mitsuru Sahara, a senior forex trader at UFJ Bank.

Just last week the Fed raised overnight rates to 3.75 percent and said Hurricane Katrina's more damaging hit to the economy would not pose a "persistent threat", repeating that more monetary tightening was needed.

The Fed's tightening campaign began in June 2004 and has helped to lift the dollar about 11 percent against a basket of currencies this year.

The market was also mindful of the outcome of a meeting of Finance ministers and central bankers from the Group of Seven economic powers at the start of the weekend.

The G7's post-meeting statement omitted 18-month-old language urging more currency flexibility in regions where it was lacking and commended China for the 2.1 percent revaluation of the yuan in July.

"In the long run, this change could be seen as meaningful," said Kikuko Takeda, a currency analyst at Bank of Tokyo-Mitsubishi.

"The G7 had been calling for a change in China's forex regime, and that's why the market had been interested in the issue. In that sense, interest in the yuan will retreat."

The yen had often been bought as a proxy for the yuan whenever G7 pressure on China to revalue had strengthened, but most traders saw little immediate effect of the G7 communique on the Japanese currency.


The euro bought $1.2035 after falling to around $1.2010 -- its lowest level since July 27 and off the $1.2040 fetched in late U.S. trade on Friday.

Traders were keen to see whether the euro can protect $1.20, where they suspect some central banks are ready to buy the euro to put in their official reserves.

The British pound also hit a two-month low around $1.7700 before climbing back up to $1.7750 -- little changed on the day.

The dollar was down slightly at 112.35 yen on sales by Japanese exporters. That compares with around 112.50 yen in late U.S. trade, but still in sight of a two-month high above 112.63 yen.

Some traders said the U.S. currency could test the 14-month high of 113.73 yen hit on July 20.

"I think the dollar could rise to the upper half of 113-114 this week," said Kotaro Kunimochi, director of forex trading at Barclays Capital, citing the tendency of Japanese investors to buy more foreign bonds ahead of half-year book closing at the end of September.

Although data showed on Monday that Japanese investors broke a 10-week steak of heavy foreign bond buying in the week that ended on Sept. 17, traders said they expected hefty buying this week.

The yen could gain support from a government survey released on Monday that showed big Japanese manufacturers were more confident about business conditions in the three months to September.

The poll augured well for the Bank of Japan's closely watched tankan survey of corporate sentiment due next Monday and could fuel fund inflows to Tokyo shares.

(Additional reporting by Shiho Tanaka and Rika Otsuka)

source: reuters

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Friday, September 23, 2005

Dollar rallies, Rita a little less fearsome

SYDNEY, Sept 23 (Reuters) - The dollar held broadly firmer
in Asia on Friday after Hurricane Rita weakened in ferocity,
leading investors to price in less risk of massive disruption
to oil and refining capacity in the Gulf of Mexico.
Rita was donwgraded one notch to a Category 4 hurricane on
Thursday, still very powerful but not quite as frightening as a
Category 5.
As a result crude oil pulled back beneath $67 a
barrel, dampening talk that ever-rising energy costs would
finally tell on the U.S. economy and perhaps halt the Federal
Reserve's tightening campaign.
Traders, fearing the worst outcome in the Gulf, had sold
the dollar in favour of safer havens, but were now buying it
"Markets always price for the worse, then row back when it
doesn't happen," said Robert Rennie, chief currency strategist
at Westpac. "In this case, as soon as Rita was donwgraded the
dollar jumped in a relief rally, it's as simple as that."
The bounce was aided by a wave of stop-loss buying when a big
technical level at $1.2180 per euro gave way, so that in early
Asian trade one euro bought $1.2150, a full cent below
Thursday's $1.2269 peak.
Still, the euro remains well above Monday's two-month
trough of $1.2098 hit when worries about the political
stalemate in Germany were considered more important than the
weather in the Gulf.
The dollar likewise firmed on the Swiss franc,
reaching 1.2793 francs from a 1.2656 low on Thursday.
The story was much the same in dollar/yen, though Japan has
as much to lose from high energy costs as the U.S. given it
imports all its oil.
The dollar was hovering at 111.64 yen in Asia,
having been as low as 110.99 overnight. It still faces tough
resistance at the week's 111.96 high and then a whole band of
former tops in the 112.60 to 113.00 area.
Analysts doubted the dollar would break higher in local
time given Japan was on holiday.
"It's pretty quiet out there and the ranges are likely to
hold," noted Westpac's Rennie. "In fact, all the majors have
been pretty much range-bound, barring the Canadian of course.
That's been on a tear."
The Canadian currency has been benefiting from the
country's enviable position as a net energy exporter and
touched a 13-year high on Thursday around C$1.1619 per U.S.
Sterling steadied at $1.7911 having fallen more
than 1 percent on Thursday amid talk U.K. oil firm BP would bid
for Spanish company Repsol. The potential flow out of sterling
into euros could weigh on the pound, at least in the long

source: reuters

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Wednesday, September 21, 2005

Dollar bounces up but market wary of Rita

By Brent Kininmont

TOKYO, Sept 22 (Reuters) - The dollar climbed against the yen and the euro in choppy trade on Thursday, although it was capped by nervousness about the potential damage to the U.S. economy from another monster hurricane churning towards the Gulf Coast.

Demonstrating how keen investors were to buy and sell on Hurricane Rita, the dollar got a lift on market whispers that Rita had weakened, despite weather monitors showing it is the third most intense Atlantic hurricane on record.

Before the rumours, "everybody sold dollars because Rita grew to Category 5," said Ryuichi Atsuta, head of forex trading at Bank of America in Tokyo.

Recognising the risk that Rita poses, oil companies shut down refineries in Texas ahead of landfall, now expected late on Friday or early on Saturday -- all but guaranteeing a rise in the price of gasoline.

In the wake of Hurricane Katrina in late August, the dollar hit three-month lows against the euro, due in part to surging oil prices and the potential for a crimping of consumer spending.

"What's on people's minds is the possibility of a slowdown of the U.S. economy given the accumulation of interest rate hikes in the past year and a half and on higher oil prices," said Kikuko Takeda, a currency analyst at Bank of Tokyo-Mitsubishi.

After extending the previous day's losses in early Asian trade, the dollar was also bought back as Tokyo dealers who held short positions in the currency covered those bets ahead of a Japanese national holiday on Friday.

The euro fetched $1.2205, down slightly from the level in late U.S. trade on Wednesday, when it rose 0.8 percent. Against its Japanese counterpart, the euro was up about 0.2 percent at 136.40 yen.

The single currency rose as high as $1.2270, propelled higher after stop-loss levels were taken out at $1.2250, traders said.

The dollar was up 0.4 percent at 111.70 yen after falling 0.6 percent on Wednesday.


The dollar also found continued comfort from Tuesday's statement by the Federal Reserve that suggested the central bank would keep raising interest rates, and that damage wrought by Katrina did not pose a persistent threat to the economy.

Still, some market players said Rita could tilt the Fed towards pausing its run of rate hikes if the damage ripples through to the larger U.S. economy.

Others said Rita's effect on the dollar should be short-term, and the currency was unlikely to break out of the 109-112 yen range of recent weeks.

"I don't think weather issues like hurricanes can breach the trading range," said Takeda at Bank of Tokyo-Mitsubishi.

The Fed raised its benchmark fed funds rate for the 11th straight meeting on Tuesday, taking it to 3.75 percent.

After three lean years, the dollar has risen this year on its widening rate advantage over the euro and the yen.

source: reuters

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Tuesday, September 20, 2005

Dollar a touch softer as Fed decision looms

By Katie Hunt

LONDON, Sept 20 (Reuters) - The dollar inched lower against the euro on Tuesday but remained near the previous session's seven-week high with the Federal Reserve widely expected to raise U.S. rates for an 11th straight time later in the day.

The single currency won some respite after Monday's slide in the wake of Germany's indecisive election result that has cast doubt over the pace of reforms in Europe's largest economy.

The market's main focus was the Fed decision and its accompanying statement due around 1815 GMT.

Players are looking to see if the central bank will alter its pledge to raise rates at a "measured" pace to remove accommodative policy in the wake of Hurricane Katrina, which devastated New Orleans less than a month ago.

"We would expect the Fed to say something about Katrina and what it means for the immediate and long-term impact on activity and I think there's a lot of uncertainty about what they may say," said Adam Cole, senior currency strategist at Royal Bank of Canada.

"Also once again there seems to be some debate as to whether the accommodative and measured statements stay in or come out. There is a fair mix of opinion going into it so there is scope for some surprise," he added.

Most top Wall Street economists expect the Fed to raise U.S. interest rates by a quarter of a percentage point when its policymakers meet on Tuesday, a Reuters poll has found. [ID:nNAT001796].

Rising U.S. interest rates have spurred a rally in the dollar this year.

By 1145 GMT, the euro was at $1.2162, up nearly a quarter percent on the day but still within sight of the seven-week low around $1.2100 hit on Monday after the German vote failed to produce a clear winner.

Against the yen, the euro was unchanged at 135.35 yen.

The dollar dipped 0.2 percent to 111.31 yen from around 111.55 yen in late New York trade. The yen was supported as Tokyo shares hit a four-year high.


Currencies hugged narrow ranges as investors were reluctant to take fresh positions on concerns that Tropical Storm Rita could turn into a major hurricane and pummel the already battered oil facilities in the Gulf of Mexico.

All 80,000 residents were ordered out of the Florida Keys on Monday.

"There's concern about this Tropical Storm Rita. People are watching that a little bit more closely, given Katrina and its impact on the market. There's some unwillingness right now to take aggressive positions," said Paul Mackel, FX strategist at ABN AMRO.

The Canadian dollar hovered near a 13-year high hit against the U.S. dollar and a seven-year high against the yen after oil prices jumped on Monday.

U.S. crude oil futures slipped below $67 a barrel on Tuesday after climbing as high as $67.60 on Monday.


The euro was still smarting after the stalemate election in Germany raised prospects for further delays in implementing labour market and other reforms.

Chancellor Gerhard Schroeder and Christian Democrat leader Angela Merkel were scrambling to find coalition partners in the aftermath of the most inconclusive German election result since World War Two.

The euro's tentative comeback was dampened by news that German investor confidence fell by more than expected in September in part due to uncertainty about the country's future economic policies.

An expectations indicator compiled by Germany's ZEW think tank, based on a poll of 309 analysts and institutional investors, fell to 38.6 in September from 50.0 in August and was far short of a forecast of 45.0.

The think tank began collecting responses for the survey on Sept. 5 and closed it on Monday at 1500 GMT - capturing some reaction to Sunday's inconclusive poll.

source: reuters

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Friday, September 16, 2005

Dollar eases, eyes U.S. consumer confidence data

By Veronica Brown

LONDON, Sept 16 (Reuters) - The dollar eased from the previous session's two-week highs versus the euro on Friday before data expected to show a slump in U.S. consumer confidence in the aftermath of devastation wreaked by Hurricane Katrina.

The euro also advanced as market players squared positions in the single currency before this weekend's closely contested election in Germany that could determine the pace of economic reforms in Europe's largest economy.

The University of Michigan index of consumer confidence due at 1345 GMT is expected to show a fall to 85.0 in September from 89.1 in August and comes after a surprisingly weak survey of manufacturing from the Philadelphia Federal Reserve on Thursday.

Data on the U.S. current account deficit in the second quarter and capital inflows into the United States in July are also due later in the session.

"The market, looking for a move down to 85 in the Michigan data, is maybe not pricing in the full risk of a significant slow-down...I think the dollar is vulnerable to a weaker number," Bear Stearns currency strategist Steve Barrow said.

The euro climbed as high as $1.2309 before pulling back to $1.2250 by 1132 GMT. It was still up a quarter percent on the day but within the $1.22-$1.25 range seen over the past two weeks. The dollar hit a two-week high against an index of currencies on Thursday.

The euro traded around 135.78 yen, up 0.4 percent from late U.S. trade. Little euro reaction was seen from final euro zone August inflation data which came in slightly above expectations.

The dollar was up a quarter percent against the yen at 110.82 yen.

Many in the Tokyo market shied away from placing big bets on the dollar ahead of a three-day weekend in Japan.


Opinion polls show that conservative leader Angela Merkel may not win an outright victory over Chancellor Gerhard Schroeder, raising the possibility of a "grand coalition" government that could make compromises on market-friendly reforms.

"The market is building in a risk premium because of the uncertainty surrounding the election -- once we get that out of the way, all other things being equal, the euro will probably bounce," RBC Capital Markets senior currency strategist Adam Cole said.

The centre-right coalition sought by Merkel is running marginally ahead of other main parties, a poll on Friday showed.

However, an estimated 15 percent of voters have yet to make up their minds.

Bear Stearns' Barrow said any impact from the German poll may not be felt until the middle of next week after the U.S. Federal Reserve makes its decision on interest rates.

Earlier in the month, devastation caused by Hurricane Katrina led some in the market to conclude the Fed could put U.S. interest rates on hold after raising them at each of its meetings since June 2004.

But comments from Fed officials have suggested the key rate will rise on inflation concerns despite the damage caused by Katrina, tilting market expectations in favour of a 0.25 percentage point hike to 3.75 percent on Tuesday.

The market will scrutinise the Fed's post-meeting statement for any indications the central bank may slow its pace of monetary tightening.

source: reuters

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