Forex Investment and Currency Trading

Market Outlook
The dollar continued to sag on Monday as risk appetite improved on a US plan to remove toxic assets from bank balance sheets after details of the scheme were revealed. The Federal Reserve’s plan to purchase longer term Treasuries, which was announced last week, also continued to weigh on the greenback on concerns that the policy could lead to an oversupply in the world’s main reserve currency.  Stock markets around Asia rose and European bourses opened higher as investors eyed plans by Treasury Secretary Geithner to purge US banks of “toxic” assets.

EUR/USD
Current: 1.3560
The dollar continues to sag this morning as risk appetite improved on a US plan to remove toxic assets from bank balance sheets after details were revealed. However, the euro has not taken off as much as many expected, and the inability of the euro to have set a new high earlier today has tempered enthusiasm. Meanwhile, European Central Bank chief Jean-Claude Trichet signalled that the central bank remained wary of interest rates falling to zero in a newspaper interview published this morning. The ECB has become increasingly isolated among major central banks as it has not moved beyond interest rate cuts to forms of quantitative easing to boost the recession-hit area. Markets this morning will focus on US Treasury Secretary Geithner’s presentation on toxic assets plan.

GBP/USD
Current: 1.4480
Sterling climbed against the dollar on Monday, hitting a one month high as investors risk appetite was boosted by hopes over a US plan to help banks offload their soured loans, prompting broad dollar selling.  The United States offered financing for private investors to help cleanse banks of up to $1 trillion in toxic assets that are blocking lending and worsening a deep US recession.

USD/CHF
Current: 1.1285
The Swiss franc was weaker against the euro early on Monday as the single European currency staged a sharp rise against the dollar amid increased risk appetite among investors. The Swiss currency has been capped against the euro by repeated comments by the Swiss National Bank that it does not want the franc to rise any further against the euro. SNB president Jean-Pierre Roth said in a newspaper interview  on Friday that the buying of foreign currency is the best way to fight deflation and was not intended to put Switzerland at an advantage over other countries.

AUD/USD
Current: 0.6995
The dollar weakened further across the board on Monday as the US government fleshed out a plan to purge banks of up to $1 trillion in toxic assets, boosting hopes for a recovery in the world’s largest economy. The Australian dollar hit a 2-1/2 month high against the dollar.  Commodities have been holding firm, most notably oil above $50 per barrel.

USD/MXN
Current: 14.40
Mexico’s unemployment rate to be released on Tuesday, is expected to decline about 4.9 percent, after spiking 5.0 percent in January, much more than forecasted by analysts.  Mexico’s January retail sales data is expected to show a decline of 3.95 percent versus a drop of 3.30 percent in the prior period. Mexico’s first half inflation seen rising 0.21 percent versus 0.17 percent in the prior period.  Core inflation, however, is seen slowing to 0.20 percent from 0.29 percent in the prior period.

USD/JPY
Current: 97.20
The dollar firmed against the yen this morning but is still well down from a four-month high hit earlier in March. It dropped to a one-month low last week. The yen, which along with the dollar has been the other major gainer during the recent times of financial stress, also came under heavy selling pressure, falling to a 5-month low against the euro and a 16-week low against sterling.

USD/BRL
Current: 2.2780
As Brazil’s economy slows expectations are building for an aggressive rate cut to 9.25% by the year end. Although the market in Brazil has rebounded after Treasury Secretary Timothy Geithner released a plan for toxic assets to be taken off the balance sheets of the banks. Commodities are holding  firm in support of the local currency.

USD/CAD
Current: 1.2330
The currency pair has found a range so far this morning, with the initial USD sell-off failing to extend for now as a confused start to the week emerges. Regarding sentiment, all rests on the toxic plan announcement and subsequent equity market response. For now, firm oil prices well above the US $50 mark should help keep the loonie pullbacks shallow, although stronger headline bounces should continue to find lower highs.

USD/KRW
Current: 1382.90
The South Korean won rose 1.5 percent against the dollar on Monday as the US Treasury’s latest plans to rescue its ailing banking system boosted appetite for riskier assets such as stocks.  The won also found further support from data showing Asia’s fourth largest economy posted a $2.6 billion trade surplus during the first 20 days of March. South Korean shares ended up 2.44 percent with foreign investors buying a net 199.5 billion won worth of stocks in the country’s main exchange.

USD/CNY
Current: 6.8335
The yuan closed weaker against the dollar in the spot market on Monday after a global dollar rebound on Friday allowed China’s central bank to push the yuan’s reference rate back into its three month old range.  On the offshore NDF market the one year briefly fell to imply yuan appreciation for the first time since late September, with traders citing speculation about the possibility of further global dollar weakness in the near future.  Dealers said the yuan’s decline was also partly propelled by a belief that the dollar’s global weakness last week, sparked by the US Federal Reserve’s announcement on Wednesday that it would purchase $300 billion in Treasuries in the next six months, was not sustainable.

USD/INR
Current: 50.38
The Indian rupee edged higher on Monday, gaining for the third successive day as rising Asian stock markets revived hope of capital inflows into the local share market.   Last week the rupee rose 1.7 percent, its biggest gain since the week to Dec. 19. The main stock index was up 2 percent in early deals.  Data showed foreign investors bought almost $240 million in three days to Thursday, including $110.1 million on Tuesday, which was their biggest one day purchase since Jan. 6.