Daily Hot Sport

The Canadian dollar yesterday as the crisis in Europe escalates, damping demand for commodities and commodity-dependent currencies. The loonie trimmed its losses today on good fundamentals in Canada and the United States.
Talks about Greece leaving the eurozone intensified after the European Central Bank paused lending to some Greek banks. The ECB said it would resume borrowing after the banks boost their capital:

Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations.


The central bank explained that it does not want to see Greece exiting the currency union, but the bank cannot break the rule to lend only to reliable financial institutions. Anyway, markets reacted negatively to the news. The Stoxx Europe 600 Index fell 0.6. Crude oil, the key export of Canada, declined to the lowest level in six months.

Fundamentals besides the European woes remain positive for the Canadian currency. The United States continue to show signs of recovery and Canada itself is doing well. Canadian manufacturing sales increased 1.9 percent in March, demonstrating the largest advance since September 2011. Many analysts say that Canada’s dollar would be a very strong currency in absence of the European crisis. Unfortunately for the loonie, the crisis in Europe does persist.

USD/CAD fell from 1.0124 to 1.0109 as of 1:47 GMT today after reaching 1.0130 yesterday — the highest level since January 25. CAD/JPY was up from 79.27 to 79.39. EUR/CAD rose from 1.2873 to 1.2886.

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The New Zealand dollar erased its earlier gains today as the potential Greece’s exit from the eurozone continued to spoil mood of Forex market participants. The currency traded near the lowest level this year.
Greece faces a new election on June 17 and traders are worried that it may result in the country leaving the euro-union. The announcement of the European Central Bank that it stopped lending to some Greek banks was not helping market’s mood either. Earlier, the kiwi rallied on speculations that recent losses were excessive. ANZ National Bank reported that the number of job advertisements fell 2 percent in April, following the March’s 0.9 percent decline.



NZD/USD fell from 0.7642 to 0.7634 as of 12:27 GMT today, near yesterday’s low of 0.7623, which was the lowest level since December 20. NZD/JPY slipped from 61.32 to 61.23, while the daily minimum of 61.15 was the lowest since January 17.

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Eurozone bank worries are sending the euro lower today, along with rises to funding costs. Uncertainties about what’s next for Greece and for the eurozone remains, and that is weighing on the euro in Forex trading right now.

German bund futures hit record highs today, reaching 143.79 at one point, and Spanish bond yields are on the rise. Spanish borrowing costs continue to be of concern, since it means that the debt will soon be unaffordable for Spain, and a crisis could ensue. Italian bonds are higher as well, but that country remains somewhat in the background as focus remains on the growing political difficulties in Greece and the banking problems in Spain. However, the fact that Italy has its own problems is likely to become an issue at some point, when Forex traders and others move their focus from Greece and Spain.


New Greek elections have been called, but those are still about a month away. Once again, those opposed to the bailout and its austerity measures are expected to do well. Some are bringing up the possibility that Greece could end up leaving the eurozone, and there are worries that other countries could be encouraged to follow suit.

At 13:15 GMT EUR/USD is down to 1.2705 from the open at 1.2717. EUR/GBP is actually higher at 0.8032, up from the open at 0.7993. EUR/JPY is down to 101.8690 from the open at 102.1465.

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Aussie is turning in a mixed performance today as choppy markets look for direction, and try to process all of the difficulties happening in the eurozone. On one hand, Aussie is lower against the US dollar as risk aversion makes an appearance. But, on the other, the Australia dollar is gaining against European currencies weighed down by difficulties.

Against the US dollar, the Australian dollar is losing ground. US dollar is considered a safe haven in times of economic turmoil, so it’s not much of a surprise that the greenback is in demand versus the Aussie. With concerns about bond yields in Spain and Italy, and worries that Greece will end up leaving the eurozone after its political difficulties are sorted, it’s not much of a surprise that many Forex traders seek safe haven in the US dollar, eschewing high beta currencies.



On the other hand, though, the eurozone is so problematic that European currencies are falling out of favor. The Australian dollar is considered a better choice than the euro or the pound right now. For now, Aussie has the upper hand, and is even getting a little support from slightly improving gold prices.

At 14:04 GMT AUD/USD is down to 0.9910 from the open at 0.9928. EUR/AUD is down to 1.2814 from the open at 1.2821. GBP/AUD is down to 1.5950 from the open at 1.6029.

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The Brazilian real rose today, but stayed near the 2 per dollar level as the impact of the European crisis on currencies of emerging markets sapped strength of the Brazilian currency.

The real is suffering from risk aversion sentiment among speculators and Brazilian policy makers are not likely to support the currency. On the contrary, the government may be glad to see a weaker currency as President Dilma Rousseff said that she considers the real “extremely overvalued”. Alfredo Barbutti, an economist at Liquidez DTVM Ltda., summarized:


Everything is favoring the depreciation of the real. The government supports it, and there’s an environment of crisis abroad.

USD/BRL fell from 2.0015 to 1.9967 as of 14:52 GMT today. The daily minimum was 1.9930 and the maximum was 2.0064.

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US dollar is lower today as risk appetite makes an appearance in the markets. As commodity prices rise, and equities see a bit of a reprieve from recent troubles, the greenback is pulling back. Concerns about Europe remain, but they are being trumped by other news — especially the imminent Facebook IPO.

In less than hour, the Facebook IPO will be launched, and that is the focus today. Equities are expected to be in favor today, and commodities are doing reasonably well. Also weighing on the US dollar is some speculation that the Federal Reserve will introduce more economic stimulus. With disappointing factory data, and with a jobs market (unemployment claims remained flat this week) that continues to show little improvement, concerns about the US economy remain. Quantitative easing is designed to weaken the US dollar, and if it is used, dollar weakness will persist.


For now, though, US dollar struggles are likely to be temporary. The Facebook IPO is generating interest and distracting from Europe, but when the excitement is over, the problems plaguing the eurozone will still be there.

At 12:54 GMT EUR/USD is up to 1.2713 from the open at 1.2697. GBP/USD is up to 1.5820 from the open at 1.5797. USD/JPY is higher at 79.2650, up from the open at 79.2780. The dollar index is at 81.341, down from the open at 81.506.

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UK pound is being helped on two fronts today. General risk appetite, with the focus on the Facebook IPO, is helping the sterling against the US dollar. On the other hand, pound is higher against the euro, as concerns about what’s happening in the eurozone make the pound a preferred choice as a European safe haven currency.
Right now, pound is gaining against the US dollar as some disappointing news (including the unemployment claims data released this week) provides a foundation for risk appetite. Also providing a foundation for risk appetite is the Facebook IPO. Equities are responding well to the excitement of one of the biggest IPOs of all time, and that is helping the pound.

Against the euro, pound is gaining in large part because it’s not the euro. With Moody’s unleashing downgrades in Spain, and concerns about Greece still dominating eurozone news, it is little surprise that Forex traders favor the pound over the 17-nation currency. Pound is being treated like a European safe haven. Even though there are stil problems in Britain, and the Bank of England hasn’t taken quantitative easing off the table, many feel that the sterling offers a better value than the euro.


At 13:38 GMT GBP/USD is up to 1.5825 from the open at 1.5797. EUR/GBP is down to 0.8032 from the open at 0.8038.

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The euro reached the lowest level in four months against the US dollar and the lowest in three months versus the Japanese yen today on fears that the European crisis is escalating. The currency was higher on the day though.
German Finance Minister Wolfgang Schaeuble said that the crisis may persist for another two years. Fitch Ratings downgraded Greece’s sovereign credit rating from B- to CCC. Moody’s Investors Service lowered ratings of several Spanish banks, including the nation’s largest banks — Banco Santander (Spain) SA and Banco Bilbao Vizcaya Argentaria SA.

The euro reacted negative on the news, but managed to close above the opening level. Perhaps it profited from speculations about quantitative easing in the United States, but most likely it is just a bounce on a bear market. The shared European currency has fallen for fifth consecutive sessions against the greenback after all, and markets usually do not go in one direction for a long time. On the other hand, it was the third day of gains against the pound.



EUR/USD was down from 1.2691 to 1.2641, the low has not seen since January 16, and closed at 1.2781. EUR/JPY dropped from 100.63 to 100.20, the lowest price since February 6, before closing at 100.98. EUR/GBP rose from 0.8032 to 0.8075.

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The Chilean peso rose even after Chile’s central bank refrained from increasing interest rates. Good prospects for the nation’s economy and possibility of an interest rate hike in the future may be responsible for the currency’s gains.

The Central Bank of Chile decided to maintain its main interest rate at 5 percent. Analysts had different view on future monetary policy of the central bank. Some said that the bank would boost the rate in the second half of this year. Such outlook is justified by positive fundamentals in Chile. Chile’s central bank said in its statement that “domestically, economic activity grew faster in the first quarter than had been projected in the last Monetary Policy Report”.



Others, though, insist that the bank would not raise borrowing costs in the foreseeable future and may even lower them. They rationalize that the Chilean central bank would not dare to tighten the monetary policy amid uncertainty and financial turbulence caused by the European crisis. Indeed, that bank mentioned economic slowdown in Europe, as well as in other parts of the world, and its negative impact on commodity prices:

Internationally, the financial and fiscal situation in the Eurozone has deteriorated and uncertainty about its resolution has increased. In global markets, volatility and risk aversion have increased. In the past few months, economic indicators in the United States, China and other emerging economies have been weaker than market consensus. International commodity prices, particularly oil and copper, have continued falling, although their levels remain high.

Copper accounts for more than a half of Chile’s exports and the country is the biggest producer of the metal in the world.

USD/CLP fell from 504.6500 to 504.2500. The daily high was 505.0000 and the low was 503.60000.

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The Canadian dollar had a pretty bad week as talks about the European debt crisis plagued the Forex market, driving traders away from riskier commodity currencies.

Fears that Greece would exit the eurozone and that the crisis is spreading to Spain hammered the loonie, as the Canadian currency is usually nicknamed. Domestic fundamentals were actually good for the currency. Manufacturing sales climbed 1.9 percent in March and consumer price inflation was 0.4 percent in April. Economists believe that Canada would the first country from the Group of Eight to raise its interest rates. The loonie is likely to strengthen then, but for now the currency remains depressed.


The Canadian dollar posted losses against the greenback each day of this week. The currency was flat one day against the yen, but otherwise the trend was the same straight way down. The loonie fell even the euro and the Australian dollar, which were also weakened by risk aversion, though its moves were less straightforward versus these currencies.

USD/CAD surged from 1.0001 to 1.0221 this week, posting the highest weekly close since January. CAD/JPY sank from 79.93 to 77.25, also the lowest since January. EUR/CAD advanced from 1.2901 to 1.3060, following the drop to 1.2781 — the lowest level since January 2011. AUD/CAD climbed from 1.0012 to 1.0059 during the week.

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