Crisis Gives Loonie No Quarter

Europe’s debt story continues to eat away investor’s confidence and, as a result, the Canadian currency continues to suffer. The euro feels even worse, though, and the Canadian dollar reached the highest level in almost two years against the shared European currency.
Europe is not going to leave the news headlines anytime soon and every time traders hear about new developments in the European credit story they seek refuge as that developments rarely are good. Today’s trading session was no different as the faltering Spanish banking system fueled investors’ fears that were already strong because of Greece. The Standard & Poor’s 500 Index dropped 1.4 percent today. July futures for delivery of crude oil were down as much as 3.9 percent to $87.27 per barrel on NYMEX, the lowest level since October.
The loonie definitely felt the negative influence of traders’ uncertainty as it was heading to a 4.2 percent drop in May. Implied volatility for one-month options on the Canadian currency against the US dollar reached the highest level since January. There is some hope for the loonie, despite all the negative factors, as analysts expect positive macroeconomic data from Canada and the United States later this week.
USD/CAD jumped from 1.0222 to 1.0300 as of 23:01 GMT today. CAD/JPY slumped from 77.73 to 76.73, touching 76.46 intraday — the lowest rate since February 3. Meanwhile, EUR/CAD dropped from 1.2776 to 1.2735 and its daily low of 1.2726 was the lowest since June 2010.
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Aussie Slumps as Retail Sales Decline

The Australian dollar dipped today as negative report about Australian retails sales added to overall negative sentiment among Forex market participants. The data reinforced opinion that the nation’s central bank may continue interest rate cuts.
Retail sales fell 0.2 percent in April from March on a seasonally adjusted basis, following the 1.1 percent increase in March. The median estimate was a 0.2 percent rise. Negative domestic fundamentals added to the negative impact of the European crisis, driving the Aussie to the lowest level in six months against yen. The MSCI Asia Pacific Index of shares declined 0.8 percent.
AUD/USD slumped from 0.9845 to 0.9738 as of 15:19 GMT today. AUD/JPY tumbled from 78.27 to 76.86 and its daily minimum of 76.68 was the lowest since November 28, 2011.
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US Dollar Rallies as Risk Aversion Takes Hold of the Markets

US dollar is rallying as risk aversion takes hold of the markets. Financial markets are falling everywhere, from high beta currencies to stock markets. Concerns about the eurozone are mainly driving today’s risk averse atmosphere. With so many concerns, it’s little surprise that the US dollar is heading higher.
One of the biggest concerns right now is the Spanish banking system. Spanish banks are struggling, and the recent bailout of Bankia is feared to be the first of many. Now, there is speculation that Spain will race Greece to a eurozone exit, and that has many Forex traders nervous. All of the current fears are dredging up old fears about whether or not Greece will be able to form a government. On top of that, the Northern Italy earthquake yesterday is boosting fears about what will happen to an already-problematic Italian economy.
With all of this bad news, it is little surprise that the US dollar is rising on safe haven demand. Greenback is gaining ground today. The US economy has its own problems, and there are deficit issues in the United States, but those points seem rather small when compared with the big problems threatening to bring down Europe. For now, the US dollar is likely to remain the currency of choice, especially against the euro.
At 14:11 GMT EUR/USD is down to 1.2425 from the open at 1.2502. GBP/USD is down to 1.5556 from the open at 1.5640. USD/JPY is down to 78.9150 from the open at 79.5100.
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Swedish Krona Advances vs. Euro on Rising GDP

The Swedish krona advanced versus the euro today as the nation’s economy expanded last quarter. The currency was down against the US dollar as overall market sentiment remained depressed.
Statistics Sweden reported that Sweden’s gross domestic product expanded 0.8 percent in the first quarter of 2012, quarter-on-quarter, following the decline by 1 percent in the preceding quarter. Economists expected just 0.2 percent growth. The positive data improved prospects for krona and diminished probability of an interest rate cut by the Swedish central bank.
EUR/SEK was down from 9.0012 to 8.9688 as of 13:58 GMT today. USD/SEK climbed from 7.1940 to 7.2201, while the intraday high of 7.2397 was highest since September 10, 2010.
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Spain’s Troubles Send Euro Lower

Today, Spain’s woes are in focus, and that is sending the euro lower. EUR/USD is below the 1.2500 mark, and possibly heading even lower, thanks to concerns about Spain, as well as uncertainty about Greece and uncertainty about how the Irish will vote tomorrow when it comes to the European Union’s fiscal treaty.

With Spanish bond yields pushing higher, and concerns that Bankia won’t be the last of the Spanish banks that need help from the government, the euro is heading rapidly lower today. Forex traders are concerned about the 17-nation currency, and risk aversion is the story today as the euro heads near a two-year low against the US dollar.
Spain’s debt rating was once again downgraded, and now the country is officially at junk status, according to Egan Jones Ratings Co. Greece continues to struggle, and there is plenty of concern. Yesterday’s earthquake Italy isn’t helping the situation in Southern Europe, either. Plus, tomorrow there is a vote by the Irish to decide whether or not to accept the EU fiscal treaty that has already been rejected outright by Great Britain and the Czech Republic. All this uncertainty is weighing heavily on the euro.
At 13:16 GMT EUR/USD is down to 1.2424 from the open at 1.2502. EUR/JPY is down to 79.0920 from the open at 79.5100. EUR/GBP is down to 0.7980 from the open at 0.7994.
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Yen Gains on Woes of Europe, Flat vs. Dollar

The Japanese yen gained against most major currencies today as endless woes of European countries spurred demand for safer currencies. The yen was flat versus the US dollar, though, as the greenback is also considered to be a safe haven.
Europe’s debt story has plagued markets for several years already and it has done a great damage to traders’ willingness to risk. Previously, gold was a favorable asset among investors, who distrusted paper currencies. Nowadays, it seems, the tables have turned and safe currencies are running higher, while gold is plummeting.
The not-so-impressive performance of the yen against the dollar may be explained by poor macroeconomic reports from Japan. The unemployment rate unexpectedly increased by 0.1 percentage point to 4.6 percent in April. Retail sales rose 5.8 percent in April, following the 10.3 percent advance in March. The median estimate was 6.2 percent.
Japan is not too happy about the strength of the yen as it hurts nation’s economy. The minutes of the Bank of Japan’s monetary policy meeting showed that the central bank is going to maintain its accommodative policy. But it does not look like the bank is ready for any aggressive actions and it is questionable if the central bank’s efforts would have any effect on the appreciating currency.
EUR/JPY dropped from 99.66 to 99.35 as of 21:16 GMT today, reaching intraday 98.93 — the lowest rate since January 19. GBP/JPY was down from 124.59 to 124.32. At the same time, USD/JPY traded at about 79.49, following the rise from 79.45 to 79.64.
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Europe Drives Loonie to Monthly Loss

The Canadian dollar fell today, heading to a monthly loss against the US dollar and a second straight monthly drop versus the Japanese yen, as the crisis in Europe eroded demand for currencies related to growth. Unsurprisingly, Canada’s currency managed to outperform the euro.
The European sovereign-debt problems is spreading and it does not look like European leaders have a solid plan to contain the crisis. Signs that the fast-growing Chinese economy is slowing also does not help commodities and currencies related to them. July futures on crude oil, the major export of Canada, were down 0.3 percent to $90.56 on NYMEX today, erasing its previous advance.
Canadian currency often gets help from the recovering economy of the nation’s neighbor — the United States. Today, though, US macroeconomic reports only hurt the loonie. The Standard & Poor’s Case-Shiller House Price Index fell in March on an annual basis. On the positive side, the decline was slower than in the previous month and the index rose on a monthly basis. A really unpleasant surprise was an unexpected drop of the Conference Board consumer confidence. Analysts predicted that the sentiment index would rise from 68.7 in April to 69.8 in May, but the gauge dropped to 64.9 instead.
USD/CAD was up from 1.0236 to 1.0257 as of 17:36 GMT today, following the earlier drop to 1.0206. CAD/JPY declined from 77.58 to 77.39, erasing its previous advance to 77.85. EUR/CAD slipped from 1.2837 to 1.2802, while the daily minimum of 1.2792 was the lowest since May 15.
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Australian Dollar a Little Higher Today

Australian dollar is maintaining gains today, heading a little bit higher as some risk appetite returns to the markets. Also helping the Aussie is the fact that gold prices are gaining again. With a little optimism, and help from commodities, Aussie is gaining ground against the major currencies.

Risk appetite has been improved by hopes that Greece will put in a pro-bailout government next month. Even though there are plenty of problems with Spanish banks, there is still hope in the eurozone, and that is providing enough positive sentiment to help the Aussie right now. Also helping is the fact that housing data in the United States, as measured by the Case-Shiller Index, is remaining steady.
Aussie is also receiving support as a commodity currency. Gold prices have moved higher, breaking through the $1,575 an ounce barrier. Additionally, news that China is planning stimulus is helpful as well, since China is a major trading partner. Some worry that an expected interest rate cut by the Reserve Bank of Australia will weaken the Aussie, but for now the Down Under currency is showing strength.
At 13:45 GMT AUD/USD is higher at 0.9852, up from the open at 0.9815. EUR/AUD is lower at 1.2714, down from the open at 1.2756. GBP/AUD is lower at 1.5891, down from the open at 1.5956.
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US Dollar Looks to End May on a Strong Note

US dollar looks to end May with relative strength, thanks in large part to safe haven demand. Even though the euro is inching higher right now, on the month the US dollar is likely to log gains. Greenback is still higher against the yen and the pound, and the euro’s gains are by no means certain today.

Euro is managing to eke out small gains right now, overcoming earlier losses. However, the US dollar is still likely to end the month with overall gains. Concerns about the situation in Europe have remained high for months, and there isn’t a lot of expectation that things will suddenly improve. Worries about Spain are in the spotlight, and no one really knows for sure what will happen with the new Greek elections next month.
For now, US dollar is likely to remain in demand as a safe haven. It’s backed by US taxpayers — the most stable base in the world — and it offers a situation that most Forex traders are already familiar with. Euro may see some temporary gains, but until the sovereign debt crisis is sorted in Europe, the greenback is likely to remain higher overall.
At 13:10 GMT EUR/USD has inched higher to 1.2545, up from the open at 1.2541. USD/JPY is up to 79.4925 from the open at 79.4730. GBP/USD is down to 1.5673 from 1.5682.
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Euro Declines as Fears Grow

The euro extended its decline today amid mounting concerns about the sovereign-debt crisis in Europe and the ability of the eurozone to keep its integrity, caused by uncertainty about the June elections in Greece and signs that the crisis is spreading.
Spain is the second major worry, following Greece, for European investors, especially after its banks and regions lost access to capital markets. The government is continuously reassure that the country does not need a bailout, and the need to repeat that everything is good may be considered troublesome by itself. Even the powerhouse of the European economy, Germany, shows signs of weakness. Losses were limited, though, as polls showed that pro-bailout parties are gaining votes in Greece.
EUR/USD traded at 1.2535 as of 10:25 GMT today, following the drop from 1.2540 to 1.2509. EUR/GBP fell a little from 0.7997 to 0.7994.
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Franc Rebounds After Weber’s Comments

The Swiss franc advanced today, paring yesterday’s losses against the US dollar, as former Bundesbank President Axel Weber hinted that the currency may be appreciating amid the escalating crisis in Europe.
Weber said about Thomas Jordan’s ability to maintain the cap of the franc against the euro:

As solid and steady as he is as a central banker, so is the Swiss franc. I wake up in the morning and if somebody asks me where the Swiss franc is, I don’t need to look at any screens. I know where it is.

Jordan will be hard pressed to keep the ceiling of 1.20 francs per euro as more and more investors will fly to the Swiss currency, which previously was considered a safe haven. Yesterday, the franc fell against the euro as the Swiss National Bank was considering capital controls to prevent further appreciation of the currency.
USD/CHF was down from 0.9582 to 0.9578 as of 9:41 GMT today, following earlier drop to 0.9558. EUR/CHF fell from 1.2018 to 1.2014.
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Rupee Drops, Can Hurt India’s Economic Recovery

The Indian rupee dropped today, leading to concerns that the weak currency, which was the worst-performing Asian monetary unit last year, would spur inflation and hurt the economic recovery of India.
The Reserve Bank of India cut its key repurchase rate by 50 basis points to 8 percent in April and that move was followed by unexpected increase of inflation to 7.23 percent. Now the central bank is in a difficult position as without rate cuts the currency will continue to weaken, leading to growing inflation, but low borrowing costs may also boost inflation. Analysts estimated that gross domestic product increased 6.7 percent in March 2012 from a year ago, demonstrating the slowest rate of growth since March 2009.
USD/INR rose from 55.3750 to 55.1862 as of 18:49 GMT today.
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Brazilian Real Climbs as Central Bank Sells Swaps

The Brazilian real advanced today as the central bank auctioned currency swaps in a attempt to keep the real, which was the worst performer among 16 most-traded currencies, from sliding down and hurting consumers.
The Central Bank of Brazil sold 14,000 out of the 40,000 currency swap contracts on May 25. That was the fourth day of swap auction. Speculations that the central bank will slow the pace of borrowing cost cuts boosted yields on interest-rate futures. Experts say that the bank would sell swaps again if the currency will depreciate further to prevent excessive increase of consumer price inflation.
USD/BRL fell from 1.9878 to 1.9803 as of 16:59 GMT today.
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Canadian Dollar Sees Small Gains

Canadian dollar is seeing small gains today as oil prices rise a little, and as a bit of optimism returns to the markets. There are hopes that Greece will remain in the eurozone, as well as some expectation of a eurozone solution to the sovereign debt problem. All of this is providing a boost for the loonie.

Canadian dollar is seeing small gains today, improving as oil prices get a bit of a boost today. Oil prices are slightly higher on the news that polls indicate that Greeks might put in pro-bailout politicians in after the new elections next month. Also helping oil prices is the continued uncertainty over what happens next with Iran and its nuclear program. Oil is helping the loonie against the greenback.
With oil prices inching higher, the Canadian dollar is finding some support. Oil is a major export for Canada, and as oil prices rise, the loonie finds a measure of support. However, the Canadian dollar is also receiving help from improvements in the global economy, and in a more optimistic outlook. Some of the trading is hampered, though, by the Memorial Day holiday in the United States.
At 15:23 GMT USD/CAD is down to 1.0250 from the open at 1.0266. GBP/CAD is lower at 1.6084, down from the open at 1.611. EUR/CAD is down to 1.2846 from the open at 1.2890.
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US Dollar Mixed in Forex Trading

US dollar is mixed in Forex trading, with markets somewhat choppy today. Greenback is once again higher than an embattled euro, but the US dollar is lower against commodity currencies. It looks to be an interesting day on the Forex market, even though US markets are closed for the Memorial Day holiday.

US dollar is turning in a mixed performance today, thanks to some of the unique situations at play right now. Greenback is higher against the euro, thanks to continued concerns about what is happening in the eurozone. Last week, Spain had to bailout banking giant Bankia, and there is still wrangling over the idea of eurobonds. No one seems to have a solution to the eurozone problem, and that is weighing on the euro.
However, US dollar is down against commodity currencies like the Canadian dollar and the Australian dollar. With gold and oil prices higher, commodity currencies are getting something of a boost right now. Even the Great Britain pound has turned higher against the US dollar, indicating that there might be some risk appetite in the markets after all. Dollar index is lower overall, in spite of the greenback’s strength against the euro.
At 14:39 GMT the dollar index is down to 82.241 from the open at 82.146. EUR/USD is down to 1.2535 from the open at 1.2578. GBP/USD is up to 1.5695 from the open at 1.5693. USD/CAD is down to 1.0258 from the open at 1.0266. AUD/USD is up to 0.9839 from the open at 0.9816.
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Record Weekly Loss of Euro in 2012

This week, the euro had its biggest weekly loss against the dollar this year as the currency was rapidly losing attractiveness amid the escalating sovereign-debt crisis. Forex market participants were running away from the currency, making it touch the lowest level since 2010 versus the greenback.
Greece remains on the forefront of talks among investors as the elections in June may determine whether the country remain in the eurozone. The chance of the Hellenic Republic leaving the currency union is considered to be high as anti-austerity political parties are in favor of voters. Greece is in no way a single country having problems. Spain is another country in the news headlines that is giving traders creeps. The country’s sovereign credit rating was cut by Standard & Poor’s and Spanish banks were downgraded by rating agencies. The European Union summit has not helped the matters and in fact even worsened investors’ sentiment as it showed that European countries are divided in their opinions regarding the best way out of the crisis. Talks about disintegration of the eurozone and the euro are abound. They are, obviously, not beneficial for the common European currency.
The performance of the euro was almost similar against all currencies. The shared 17-nation currency rose on Monday, but later it entered a free fall. The euro has fallen for the fourth consecutive week against the dollar and for the fifth week versus the yen.
EUR/USD slumped from 1.2763 to 1.2515, posting the biggest weekly loss since December, touching 1.2496 — the lowest price since July 2010. EUR/JPY dropped from 100.97 to 99.72, while the weekly low was at 99.35 — the lowest since February 1. EUR/GBP tumbled from 0.8076 to 0.7990 — the lowest weekly close since October 2008.
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Baht Posts Biggest Weekly Drop in 2011

The Thai baht dropped today, posting the biggest weekly loss this year. Foreign investors reduced holdings of the nation’s shared on fears that the crisis in Europe would slow global economic growth.
Nalin Chutchotitham, an analyst at Kasikornbank, explained the situation:

Investors are risk-averse and stock markets and Asian currencies can still test the weaker side. Importers may be buying the dollar as well because month-end demand is usually high and also because they are worried that the dollar may rise further.

The SET Index of shares lost 2.1 percent this week, showing the third weekly fall. Thailand’s exports unexpectedly slid 3.67 percent in April from a year ago, posting the fifth decrease in six months. The median forecast was a 6.4 percent advance.
USD/THB was up 0.3 percent to 31.69 today and reached 31.73 earlier, the highest price since January 19. The currency has climbed 1.1 percent this week.
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Euro Rallies to New Lows

The euro was rallying to new lows today, reaching the lowest level since 2010, on concerns that regional governments of Spain would meet obstacles in reaching capital markets.
Artur Mas, the President of Catalonia, asked Spanish central government to aid regions access funding. Deputy Prime Minister Soraya Saenz de Santamaria said that the government is reviewing “with all caution” requests from regional governments to help them regain access to capital markets. Officials stated that Catalonia is realizes its budget program “strictly” and will fulfill its commitments.
That was just one of many Spain’s problems. Standard & Poor’s downgraded five Spanish banks, following the cut of Spain’s sovereign credit grade. Earlier, Moody’s Investor Service also decreased ratings of several bank in Spain. It is obvious that the eurozone crisis is not limited to Greece alone and it may be spreading across all Europe.
EUR/USD traded at 1.2515 as of 18:51 GMT today after falling earlier from 1.2532 to 1.2496 — the lowest rate since July 6, 2010. EUR/JPY was down from 99.78 to 99.66, following the earlier advance to 100.31. EUR/GBP was flat near 0.7993.
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US Dollar Strengthens as European Problems Continue

Earlier, the US dollar fell back a little bit on the Forex market. However, the greenback is once again higher against its European counterparts, gaining as uncertainty over Greece — and other countries in the eurozone — continues.

US dollar is gaining against the euro and the Great Britain pound today, heading higher as risk aversion prevents Forex traders from preferring high beta currencies. European currencies are lower as continued concerns about a Greek exit from the eurozone dominate the markets. Many are hoping for the issue of eurobonds to help alleviate the situation, but even that might not help. And a Greek exit could trigger more exits, especially by other debt-burdened countries like Spain, Italy and Portugal.
Greenback remains popular, even though there are concerns about the fiscal situation in the United States. US debt continues to grow, and many wonder whether there is a problem brewing. However, with things so dramatic in Europe, the problems in the United States are being somewhat ignored, and the US dollar is still being sought as a safe haven, along with the recently downgraded Japanese yen.
At 13:29 GMT, EUR/USD is down to 1.2530 from the open at 1.2533, and off the high of 1.2605. GBP/USD is lower at 1.5667, just down from the open at 1.5668. USD/JPY is lower at 79.5720, down from the open at 79.6110.
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Japanese Yen Remains Stronger Against European Currencies

The Japanese yen continues to appreciate against European currencies, thanks to the uncertainty in Europe. Concerns about what’s next for the eurozone are weighing on risk, and the Japanese yen is once again being used as a safe haven currency.

Japanese yen is heading higher against European currencies like the euro and the Great Britain pound today. Once again, yen is receiving a boost as uncertainty in Europe — especially over Greece — dominates financial headlines. Everyone is waiting to see whether the European Central Bank will provide more stimulus and funding, as well as waiting on new Greek elections next month.
Japanese Finance Minister, Jun Azumi, blames the uncertainty in Europe for the strengthening Japanese yen. Leaders aren’t happy about the yen’s appreciation because they prefer the weakness that provides an edge in global trade. Instead, they are stuck with a yen that continues to appreciate, even after the recent credit downgrade from Fitch.
For now, Forex traders just want to favor a currency that provides a little stability and safety. It’s not really about growth right now; just about capital preservation. And the Japanese yen is well known for its stability.
At 12:51 GMT USD/JPY is lower at 79.5840, down from the open at 79.6110. EUR/JPY is down to 99.5965 from the open at 99.7530. GBP/JPY is down to 124.7030 from the open at 124.7160.
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Canadian Dollar Remains Depressed by European Crisis

The Canadian dollar fell today, dropping for the fourth straight day against its US peer, as fears of a collapse of the eurozone made Forex traders prefer the US currency to the Canadian one. The currency was flat against the yen.
The prospect of an exit of Greece from the eurozone is still haunting investors and is likely to persist until the elections in June. China and the United States also add to uncertainty from time to time as some indicators signal about slower growth. All in all, currently is not the best environment to trade higher-yielding currencies associated with risk.
The future of the Canadian currency does not look grim despite the negative factors as the economy of Canada looks robust enough to weather most adverse events. In fact, fundamentals were rather supportive for the loonie and it is somewhat surprising that the currency has not profited from them. Futures for delivery of crude oil in July rose 1 percent to $90.80 per barrel on NYMEX. The Standard & Poor’s GSCI Index, tracking of 24 commodities, advanced 0.4 percent.
USD/CAD rose from 1.0262 to 1.0270 as of 2:16 GMT today. EUR/CAD climbed from 1.2865 to 1.2876. CAD/JPY was near the opening level of 77.52.
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Spike of EUR/USD Leads to Speculation About SNB Intervention

The Swiss franc fell after a spike of the EUR/USD currency pair lead to speculations that the Swiss National Bank may take additional measures to erode the role of the franc as a safe haven.
Yesterday, for a short time, EUR/USD climbed to the highest level since March. The currency pair quickly pulled back, but that was enough to spur talks about another intervention by the SNB. There were rumors that the central bank plans to introduce a tax on deposit. Government and the bank’s officials refused to comment the speculations. Some economists say that the spike was likely caused just by some bank selling euros.
The SNB introduced the 1.20 cap on the franc against the euro in September last year. Since then, the Swiss currency was steadily appreciating, but stopped near the ceiling, breaking it only once. The franc was declining versus the dollar and the yen since April.
EUR/CHF traded at 1.2017 as of 00:20 GMT today after it climbed yesterday as high as 1.2074. USD/CHF jumped from 0.9542 to 0.9584 yesterday and stayed near that level today. CHF/JPY traded at about 83.10 at today’s trading session after falling from 83.24 to 83.01 on the yesterday’s trading session.
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Euro Can’t Maintain Gains in Forex Trading

Earlier, the euro showed signs of fight as it headed higher against the US dollar. Now, though, the euro can’t maintain gains in Forex trading and is headed lower. Worries about the eurozone, and what’s next for the currency region, are causing doubt, and uncertainty means that Forex traders are looking for safety — and safety can’t be found in the euro right now.

After seeing some earlier gains and breaking back up through the 1.2600 level against the US dollar, euro is once again lower. The 17-nation currency has been unable to hold onto gains briefly enjoyed in the wake of positive economic data out of the United States. Now that optimism is gone, and traders are left with concerns about what’s next for the eurozone.
Investors are so seeking safety that they just bought 4.6 billion euros’ worth of German bonds — at 0 per cent. The fact that investors are so uncertain about the eurozone that they are willing to simply preserve capital, rather than seek returns, is rather telling. It doesn’t bode well for the eurozone. Germany remains opposed to the idea of eurobonds, and, even though EU leaders are trying to keep Greece in the currency union, there are doubts about the feasibility of that outcome.
At 14:17 GMT EUR/USD is down to 1.2581 from the open at 1.2582. EUR/GBP is down to 0.8014 from the open at 0.8019. EUR/JPY is down to 99.9215 from the open at 100.0245.
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Better Data Boosts Risk Appetite, Sending US Dollar Lower

US dollar is moving lower right now, thanks to improved risk appetite. Most of that risk appetite is coming from enthusiasm over better data in the United States. Improvements to the US economy are helping high beta currencies, even after continued disappointment in Europe and China.

Good news in the United States is providing a boost to high beta currencies, and sending the US dollar lower, as risk appetite returns to the markets. Jobless claims in the United States fell to 370,000 last week, dropping by 2,000. Additionally, there was a rise in US durable good orders of 0.2% for April. This good news is providing some relief from all of the bad news coming out of Europe.
The sovereign debt crisis continues to dominate in the eurozone as European Union leaders look for a way for Greece to remain in the 17-nation currency zone. But euro is regaining ground as the good news in the United States boosts high beta currencies — in spite of troubles elsewhere. Forex traders are ignoring disappointing news in China and Europe in favor of a little optimism.
At 13:23 GMT EUR/USD is up to 1.2595 from the open at 1.2582. GBP/USD is higher at 1.5712, up from the open at 1.5692. USD/JPY is lower, down to 79.4700 from the open at 79.4750.
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Kiwi Pauses Decline, Can It Keep Gains?

The New Zealand dollar stalled its declined and rebounded today on speculations that losses were excessive. Gains were limited, though, as the disagreement between European leaders hurt demand for higher-yielding assets.
Losses were indeed big as the kiwi (the nickname of New Zealand’s currency) was falling since the beginning of May against the greenback and since the beginning of March versus the yen. In fact, just yesterday the currency touched the lowest level this year. The NZ dollar had a bit of good news today as the traded balance surplus widened to NZ$355 million in April from NZ$186 million in March. Nevertheless, the adverse global economic environment caused by Europe’s woes is likely to keep the kiwi from running much higher.
NZD/USD was up from 0.7516 to 0.7546 as of 11:02 GMT today after it touched yesterday 0.7457 — the lowest level since November 25. NZD/JPY climbed from 59.69 to 59.84, following the drop to 59.14 yesterday — the lowest price since December 20.
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Rupee Suffers on EU Summit & Poor Prospects for India’s Growth

The Indian rupee dropped today as a disagreement for the European leaders about a way to tackle the debt problems lead to risk aversion sentiment on the Forex market that hurt riskier currencies of emerging markets. Still, the currency managed to rebound at present.
As was expected, the summit of the European Union chiefs has not provided a positive result. And the rupee desperately needs a bullish story, but it has not found it in Europe and it is not likely to find it in India itself. The Organization of Economic Cooperation and Development predicted that India’s growth may remain “subdued” in the fiscal year through March 2013. Indeed, analysts forecast that the economy would expand 6.1 percent in the first quarter of this year from a year ago, at the same rate as in the previous quarter and that was the slowest pace since March 2009.
USD/INR rose from 55.9605 to 56.3900 before trading at 55.9400 as of 10:05 GMT today.
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CAD Reaches Four-Month Low vs. USD

The Canadian dollar slipped to the four-month low against its US counterpart and the three-month low versus the Japanese yen. The currency gained against the euro and the Australian dollar.
Interestingly enough, traders were scared by the meeting of European chiefs in Brussels tonight. Previously, the European Union summits were a source of optimism for market participants, but it looks like now people just get tired from empty promises and do not believe that anything good would come out from the meeting. Speculators are still worried that Greek elections on June 17 may result in an exit of the country from the eurozone.
Commodities took a beating and fell on negative market sentiment. The Standard & Poor’s GSCI Index, which tracks 24 commodities, fell 1.9 percent. It is not a surprise that the Canadian dollar, being a commodity currency, fell against the greenback and the yen. It could be expected that the loonie would outperform the euro that was dropping sharply. Yet the Canadian currency even managed to reach the highest level since October against another commodity currency — the Australian dollar.
USD/CAD traded at 1.0253 as of 2:18 GMT today after it reached 1.0294 yesterday — the highest level since January 9. CAD/JPY slipped to 76.98 yesterday, the lowest price since February 8, and traded today at 77.45. EUR/CAD was down from 1.2952 to 1.2890 on the previous session and traded near that level on today’s session. AUD/CAD was at 0.9993 after it touched 0.9955 — the lowest rate since October 4.
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EUR/USD Breaks 1.26 Level, Traders Running from Euro

The euro fell below the 1.26 level against the US dollar, reaching lowest level since July 2010. That level was considered to provide strong support to the shared 17-nation currency and, now that the support line is broken, traders are afraid that the currency would spiral down to even lower price.
The members of the European Union are meeting at summit today, but most analysts and traders are pessimistic about the outcome of the meeting. Germany still rejects the implementation of eurobonds even as other countries, including France, support the idea. Herman Van Rompuy, President of the European Council, claimed that the European financial crisis will be discussed at tonight’s meeting in Brussels only “at the very end”.
The Bundesbank stated that a Greek exit “would be significant but manageable within the help of cautious crisis management”. Indeed, some experts say that both the eurozone and Greece would be better if the indebted country will leave the currency union. Others argue that an exit of any country would create a precedent, which may lead to quick dissolution of the euro-area.
EUR/USD sank from 1.2686 to 1.2562 as of 16:48 GMT today. Earlier, some technical analysts claimed that the currency pair should bounce after reaching the 1.26 level, but now it does not look likely. The daily minimum was 1.2544 — the lowest since July 13, 2010. EUR/JPY slid from 101.39 to 99.67, reaching 99.52 intraday — the low not seen since February 1.
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Rand Slides to This Year’s Low as CPI Below Expectations

The South African rand slumped against the US dollar today to the lowest level this year as slower-than-expected growth of consumer prices triggered speculations that the nation’s central bank would refrain from raising interest rates.
South Africa’s inflations accelerated to 6.1 percent in April from 6 percent in March. That was the first increase in three months, which is not bad, but still below analysts’ expectations of 6.2 percent growth. The worse-than-expected data prompted speculation that the South African Reserve Bank would keep its key rate at 5.5 percent tomorrow.
USD/ZAR climbed from 8.3180 to 8.4450 as of 14:53 GMT today, while the daily high of 8.4590 was the highest since November 25.
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Euro Tanks as Greece Exit Considered More Likely

Euro is tanking today, heading lower as speculation about a Greek exit of the eurozone increases. Indeed, some think that there is a real threat for Greek withdrawal — and that such a withdrawal could prompt a domino effect that includes Spain and Italy later. Worries about what’s next for the eurozone are sending the 17-nation currency down across the board.

Recently, former Greek Prime Minister Lucas Papademos insisted that a Greek withdrawal from the eurozone is a very real threat, even as he tried to encourage Greek citizens to accept painful austerity measures. Concerns that Greece will be unable to remain in the eurozone are on the rise. Worries are triggering fears of a domino effect as well. Once the first country leaves the eurozone, it becomes easier for other countries to bail as well, and Spain and Italy are considered prime contenders for the spots as the next dominoes to fall.
For now, the main fear is a flight from deposits at banks in countries affected by the sovereign debt crisis. A fight over eurobonds, as well as other aspects of a growth package for the eurozone is being set up, as there are expected to be very big differences between the approach of new French President Francois Hollande and the German Chancellor Angela Merkel.
At 14:03 GMT EUR/USD is down to 1.2645 from the open at 1.2684. EUR/GBP is down to 0.8042 from the open at 0.8049. EUR/JPY is down to 100.4185 from the open at 101.4300.
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Bank of Japan Inaction Helps Yen

The Bank of Japan decided against taking any more action to ease at this time, and that is helping the Japanese yen. Forex traders had been expecting the Bank of Japan to ease further, in an attempt to keep the yen weak, but the BOJ offered something of a surprise following the recent downgrade by Fitch.

Citing faster economic growth, Bank of Japan officials decided to forgo additional easing measures during the most recent BOJ policy meeting. Leaders insist that public investment has increased, along with private consumption. This situation has resulted in the BOJ deciding that further easing in an attempt to stimulate the economy is not needed.
Without the specter of more easing (at least for now), Forex traders feel a little more confident about buying the yen. The yen has strengthened against its major counterparts since the announcement. Even the Fitch downgrade didn’t do much to really slow the yen — especially against struggling European currencies. Now, with the yen back in the good graces of the Forex community, there is a chance that it will become popular as a safe haven currency again.
At 13:04 GMT USD/JPY is lower at 74.4760, down from the open at 1.5761. EUR/JPY is down to 100.7045 from the open at 101.4300. GBP/JPY is down to 125.0750 from the open at 126.0100.
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Pound Drops After BoE Releases Minutes of Monetary Policy Meeting

The Great Britain pound dropped today, reaching the lowest level in a month against the US dollar and the lowest in two months versus the Japanese yen, after the minutes of the central bank’s monetary policy meeting were released.
The minutes showed that the policy makers of the Bank of England were considering additional stimulus. They cited risks associated with the European crisis as threats to the economy. Additionally, uncertain prospects for economic growth were also considered a danger:

Output remained significantly below its pre-crisis trend and persistently weak growth might impair the future supply capacity of the economy through hysteretic effects: that risk could be attenuated by a more aggressive loosening of policy in the near term.

Most members of the Monetary Policy Committee though that the current level of interest rates and asset purchases is enough to support the economy for now, but one member of the Committee voted for expanding the size of the asset purchase program by a further £25 billion to a total of £350 billion.
GBP/USD was down from 1.5767 to 1.5722 as of 10:06 GMT today, while earlier it reached 1.5674 — the lowest price since March 15. GBP/JPY dropped from 125.98 to 124.85 and its daily minimum of 124.46 was the lowest since February 16.
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AUD/USD Reaches This Year’s Low

The Australian dollar continued its tumble today, reaching the lowest level this year against the US dollar, as adverse market sentiment and the interest rate cut earlier this month are still driving forces that push the currency down.
Europe is hurting risk sentiment and, as a result, riskier currencies, the Aussie (as the Australian currency is nicknamed) among them. The general uncertainty about the future also hurts commodities. The Australian dollar is a commodity currency and the decline of prices for raw materials hurt it. Commodities rallied in the second half of the past week and extended the rally on Monday, but slipped on Tuesday.
The decrease of the main interest rate by the Reserve Bank of Australia at the beginning of this month continues to put pressure on the Aussie. The cut was deeper than anticipated and Forex market participants are afraid that more cuts would follow. On the positive note, the Conference Board reported that Australia’s leading index rose 0.2 percent in March, while in the preceding month the index showed no change.
AUD/USD slumped from 0.9806 to 0.9767, the lowest rate since November 25, 2011, before trading near 0.9760 as of 00:22 GMT today. AUD/JPY slipped from 79.41 to 78.17. EUR/AUD advanced from 1.2933 to 1.2954.
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Dollar Gains on Negative Risk Sentiment & Good US Fundamentals

The US dollar advanced today on fears of the worsening crisis in Europe that drove investors to safer currencies and the dollar in particular as the US economy continue to show signs of recovery.
Traders are worried by decline of Italy’s economy and speculation that Spain may be the next country to ask for a bailout. There was no major news from Europe recently, and that is not good as without a significant positive event the situation in the eurozone would worsen, not improve. It is not surprising that demand for safe currencies was strong. The greenback even managed to outperform the yen, another currency considered to be a safe haven, but many analysts believe that the US currency would not gain on Japan’s one for long.
Fundamentals in the United States are not perfect, but definitely better than in the European Union. Existing home sales climbed to 4.62 million in April from 4.47 million in March. The manufacturing index of the Federal Reserve Bank of Richmond slid to 4 in May from 14 in April, much more that was predicted, but the figure above 0 shows that the industry continues to expand, albeit with slower pace.
EUR/USD sank from 1.2815 to 1.2684 and GBP/USD dropped from 1.5827 to 1.5765 as of 21:51 GMT today. USD/JPY edged up from 79.29 to 79.96.
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Euro Falls as Eurobond Debate Begins

Euro is dropping today as eurozone leaders meet to discuss growth options for the 17-nation currency zone. Eurozone growth has been sluggish, verging on recession, and that is impacting the ability of member states to handle their sovereign debt. One of the options being floated as part of a package is a eurobond. However, Germany is opposed to such a measure.

Euro is heading lower today, mostly due to uncertainty. There is uncertainty surrounding the Fitch downgrade of Japan. But mostly there is uncertainty in the eurozone. While there are widely published numbers that seem to indicate that most Greeks want to remain in the eurozone, the actions in the election seem to suggest otherwise. The leaders Greeks voted for are largely against austerity measures, and Greek citizens themselves have protested austerity for months. Without adhering to the austerity measures, there is little hope that Greece can remain in the eurozone.
Another issue being debated by European leaders right now is the idea of eurobonds. Eurozone bonds would be issued in an attempt to help increase funding options for various eurozone countries. These bonds would be issued jointly, and secured jointly. While the new French president, Francois Hollande, backs the idea of eurobonds, Germany is very much against them. This is just another wrench in the works of eurozone debate, and another reason risk aversion is on the rise.
At 13:43 GMT EUR/USD is down to 1.2749 from the open at 1.2818. EUR/GBP is down to .8078 from the open at 0.8094.
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Pound Falls as CPI & HPI Drop

The Great Britain pound fell against the US dollar today after reports showed that inflation slowed and house prices unexpectedly declined, adding incentive for the Bank of England to stimulate the economy. The currency advanced against the euro after four days of losses.
The consumer price index was 3.0 percent in April on an annual basis, down from 3.5 percent in the month before. The house price index fell 0.4 percent in March from a year ago, compared to the expected increase by 0.5 percent and the February growth by 1.0 percent. The index declined 0.6 percent on a monthly basis. The International Monetary Fund recommended the BoE to add stimulus for the UK economy.
GBP/USD was down from 1.5827 to 1.5779 as of 13:13 GMT today. EUR/GBP dropped from 0.8094 to 0.8084.
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Canadian Dollar Drops Against US Dollar on Risk Aversion

Risk aversion is the Forex market driver today, thanks to the Fitch downgrade of Japan. Even though equities aren’t being much affected by the latest news, currencies are. High beta currencies like the Canadian dollar are dropping, thanks to a desire for safe haven. Loonie is headed lower against the US dollar today, even though its own credit rating is remains solid.

Canada retains the highest credit rating with all the agencies, but that isn’t helping the Canadian dollar today on the Forex market. The Japan downgrade has shaken things up a bit, and the US dollar is gaining against the loonie today. However, even though the Canadian dollar is down against the greenback, it is up against other high beta currencies, including the UK pound.
With the situation in Europe so uncertain, it isn’t much of a surprise that European currencies have been hit harder in the wake of the Japanese credit downgrade. Canada’s currency remains stronger against some of the alternatives, especially in Europe. Additionally, Canadian dollar is up against the yen, which continues to struggle as Forex traders question the economic recovery in Japan.
At 12:38 GMT USD/CAD is up to 1.0176 from the open at 1.0177. GBP/CAD is lower at 1.6047, down from the open at 1.6104. EUR/CAD is down to 1.2971 from the open at 1.3038. CAD/JPY is up to 78.48 from the open at 77.99.
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Yen Slides as Fitch Downgrades Japan

The Japanese yen fell today as Fitch Ratings downgraded Japan’s sovereign credit rating because country’s actions to reduce public huge public debt are too slow.
Fitch cut Japan’s long-term foreign-currency rating from AA to A+ and lowered the local-currency grade from to AA- A+. The outlooks on both rankings are negative. Some financial specialists recommended buying the yen against the dollar. They are reasoning that the yen is too attractive amid present turbulent times and the currency would bounce back rather soon.
USD/JPY was up from 79.29 to 79.83 and EUR/JPY rose from 101.62 to 101.96 as of 12:08 GMT today.
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Mexican Peso Profits from Promise of Faster Growth in China

The Mexican peso advanced today as China pledged to boost its economic growth, reducing the negative impact of the crisis in Europe and increasing demand for riskier currencies with higher yield.
Chinese Premier Wen Jiabao promised to accelerate economic growth in China and that pledge improved market sentiment somewhat, benefiting currencies of emerging economies. China remains one of the few sources of good news nowadays. The United States is another, although optimism for its economy dimmed to a degree. Nevertheless, speculators expect some good figures in employment reports next week. Mexico’s prospects are good too as the nation’s economy expanded 4.6 percent in the first quarter from a year ago, demonstrating the fastest growth in six quarters.
USD/MXN was down from 13.8076 to 13.7738 as of 16:42 GMT today.
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