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Daily FX Report

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The BOJ hold interest rates as expected steady at 0.3 % after rate decision today

Fri, Nov 21 2008, 09:06 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

Good morning from Hamburg. Yesterday crude oil prices dipped below 50 USD, which is the lowest level since May 2005. Euro zone prices may fall for one or two months next Year, but the region is not facing deflation, said ECB governing council member Mersch in an interview.

Market review

The BOJ hold interest rates as expected steady at 0.3 % after rate decision today. The USD/JPY edged up 0.3 % on USD demand from Japanese importers before the long weekend in Tokyo. Short –term speculators also sold the JPY to book profits after the currency pair hit a 3 week low of 93.55 the previous day. But many traders see further down side potential in USD/JPY while traders talked about option triggers sitting below 93.00 that could accelerate falls.

On Thursday the USD rose against the EUR and currencies of nations with high interest rates, like New Zealand and Canada. The CAD fell 3.27 % and the NZD more than 4.0 % against the USD. The main reason was that many investors sold risky assets such as stocks and commodities financed by loans dominated in the USD. But the USD performance was reduced by data showing the number of Americans filling for jobless benefits increased to a 16-year high of 542,000. Additionally there was more worrying economic news. A report indicated that US mid-Atlantic factory activity sank to an 18-year low.

On the other side of the globe the AUD lost versus the USD too. The Aussie decreased 4.5 % as RBA sold 3.1 billion AUD of foreign exchanges reserves in October. And the USD/CHF gained 1.0 % to 1.2243 after the Swiss National Bank cut interest rates by a full percentage point because of the economic conditions.

EUR/CHF

The EUR/CHF performed well in the first half of November with 5.5 % and reached the level from the beginning of October. At the moment the currency pair trades next to the upper line of the Bollinger Band. If the currency pair doesn’t cross the medium line clearly, the upward trend could continue.

GBP/AUD

Last week the British currency rebounded versus the Aussie about 100 pips and picked up losses from October. Also the MACD crossed its average to the upper site which might be a sign for further gains in this currency pair.

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Published on  Fri, Nov 21 2008, 09:23 GMT