The euro and Swiss franc rose to new highs since Q4 2011, while sterling moved to within half a cent of the best level since 2009 set in mid-February in recent days. The market was all rife with speculation of a break out. However, our reading of the technical and fundamental condition suggests dollar bears tread carefully.
If the past week was about the lack of escalation in both Russia/Ukraine and China, coupled with the ECB holding pat, next week may see the pendulum swing back a bit. This could lend itself to a more consolidative trading, which in the current context may be somewhat supportive of the greenback.
With a referendum planned in Crimea next weekend that will likely lead Russia's annexation, the confrontation may escalate again. Although the yuan strengthened in the past week, we suspect that uncertainty spurred by the first on-shore default and
By Chad Karnes
The U.S. Federal Reserve's dual mandate is to maximize employment and combat inflation, nothing else right? Well, if Japan's central bank and monetary policy is any sign, the Reserve banks of the world also likely control the equity markets too, unintended consequences or not.
The chart below is all I need to see to realize that indeed the world's banks' easing and currency policies directly affect equity markets. This chart adds empirical data where most already have assumptions and gut feelings of a Fed driving equity markets, just this one is occurring on the other side of the world.
Yen Carry Trade
The Yen (FXY) carry trade was a popular vehicle for profits by the big banks in the mid-2000's. A carry is when an investor borrows at a low interest rate in one country (Japan for instance) and then buys a strong currency or asset in
By Dean Popplewell
Governor Stevens at the Reserve Bank of Australia is having a tough go of it recently. Again, and for second time this week, Governor Stevens caused the biggest ripple in the currency markets in an otherwise quiet pre-NFP trading session. Speaking before the House of Representatives of Economic Committee, Stevens reiterated that Aussie policy makers saw the $0.90 as a critical threshold where the AUD becomes too high.
Earlier in the week the RBA left its cash rate target unchanged at a record low 2.5% as expected, but saw its own currency value too high by "historic standards." Last year's RBA jawboning saw the commodity and interest rate sensitive currency among the worst performers in the developed currency category - for 2013 the AUD fell -15% outright. According to policy makers, the decline in the exchange rate to date will obviously assist in achieving balanced growth in