Rupee Falls on Oil Demand Speculations | ForexGen News

The Indian rupee showed a weakening today at the Forex market as the speculations that the domestic companies will have to buy oil rose in the country.

As the commodities prices stopped falling today on the global markets the fears that the companies will have to convert the national currency into dollars to buy the oil pushed the rupee down. It was among the worst performing Asian currencies today.

While rupee’s behavior is seen as closely correlated with the oil prices, it will remain volatile and its fluctuations on the Forex market will be exploited by the traders. The central bank can interfere in this process with artificial appreciation.

The widening current-account deficit in India adds another reason for this Asian currency to go down compared to other world currencies. Even the high interest rates in the country won’t help as the deficit remains at record above $13 billion.

USD/INR rose today to in Mumbai trading 42.9050 from its close value of 42.8925 yesterday.

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Yuan Appreciates beyond 6.9 per Dollar | ForexGen Signals

The Chinese yuan extended its gain against the U.S. dollar today reaching the 20 percent appreciation since the end of the peg in 2005 as the new meetings of the U.S. and Chinese financial officials will be held soon.

The yuan’s gain for the period since July 21 2005 can be compared with 29 percent gain of euro versus dollar for the same period. Great Britain pound rose 13.2 percent and the Japanese yen made it 4.7 percent for the same 35-month period.

The current pace of the yuan’s appreciation is seen as the only way to slow down the accelerating inflation by the many currency strategists in the Wall Street.

As the international trade balance surplus widens in China and the foreign reserves grow the monetary base in the country threaten to press on the consumer prices. Chinese government urges banks to set aside bigger reserves as one of the measures to fight the inflation. Further decreasing of the yuan supply can lead to its continuous strengthening.

USD/CNY declined today from 6.9004 to 6.8959 today according to the China Foreign Exchange Trade System. The decline of the currency pair is at 1.7 percent so far in the second quarter.

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Yen Falls as Carry Trade Attracts Traders | ForexGen

The Japanese yen fell significantly today against the other major world currencies as the fast growth on the Asian and European stock markets attracted more participants to the carry trade activities.

Yen was used as a low-cost borrowing currency to fund the high-risk assets, including such currencies as euro, pound and the Australian dollar. All those currencies rose good today against the yen. The U. S. dollar also gained from the carry trades, but its gain was limited due to the correction that it experiences on Forex after the growth last week.

Even the major investment banks are turning their heads towards the carry trade, using yen as a short currency, as the global stock markets improve and the risk appetite grows among the investors.

The current attractiveness of the carry trades is based on the interest rate difference between the Japan and the countries with the higher borrowing costs. The benchmark rate in Japan is 0.5 percent compared to 4 percent in the Eurozone, 5 percent in the United Kingdom, 7.25 percent in Australia and 2 percent in U.S.

EUR/JPY reached its highest value since November 7 2008 today — it rose from 166.43 to 167.36 as of 12:58 GMT with a daily high at 167.68. GBP/JPY soared to the highest value since February 27 — from 210.35 to 212.54 today. USD/JPY is currently trading near its open rate at 108.06 but the daily high was at 108.58. AUD/JPY rose from 101.50 to 101.76 today.

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Paulson, Lagarde, Kudrin Support USD at G8 | ForexGen Reports

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The finance ministers from the Group of Eight nations confirmed their position in the favor of a stronger U.S. dollar at the meeting in Osaka, Japan today.

The U.S. Treasury Secretary Henry Paulson said that the strong dollar «is in our nation’s interest» after the meeting today. French Minister of Finance Christine Lagarde told reporters that she’s happy to know that the U.S. financial authorities are pro strong dollar policy.

G8 identified the rising inflation as their main concern. Both Lagarde and the Russian Financial Minister Alexei Kudrin agreed that the dollar’s appreciation could contribute to taming the inflation worldwide. Majority of the commodities are priced in the U.S. dollars and if greenback falls their cost grows too, accelerating the consumer prices globally.

Kudrin also named the weaker dollar one of the major reasons for the current oil spike, mentioning that the stronger dollar and a lower oil price would certainly cool inflation down. Paulson argued that since 2002 dollar declined by about 30 percent, while oil surged up by more than 500 percent.

This week had a very successful result for the U.S. currency, which gained 2.6 percent against the euro (the fastest drop for EUR/USD since march 2005). Although the growth of dollar has been strong recently, it’s still down 5 percent since the start of 2008.

Although U. S. financial officials were reluctant to make any serious statements about their position on the strong dollar for a long time, on June 2 Ben Bernanke said that the central bank will pay a closer attention to the dollar’s rate on Forex and on the next day Paulson said that he favors a stronger dollar.

U.S. Dollar Headed for Record Bullish Week | ForexGen Charts

The U.S. currency is heading for its biggest weekly gain since March 2005 against the European currency as the dollar benefits both from past Bernanke’s statements and the current expectations for G8 meeting.

Many reasons stand behind such a fast dollar appreciation this week — among them Fed’s intention to raise the interest rate to fight the inflation and the Treasury Secretary Henry Paulson’s statement that the U.S. may buy out its currency on the Forex.

Consumer price index is also coming out in U.S. at 12:30 GMT today — the reading above the expected 0.5 percent gain will definitely push dollar farther up as the bullish expectations on the interest rate will prevail then.

The U. S. dollar has also its best week since February 1999 against the Japanese yen. Financial officials from Europe say that they are satisfied with the current dollar’s appreciation as it benefits their national exporting companies.

More investors become confident that the Federal Reserve’s next step will be increasing the interest rate. The only questions that they are asking is when and by how much.

Finance ministers from the Group of Eight nations are meeting today and tomorrow in Osaka, Japan to discuss the global problems. Some currency traders believe that the important statements regarding the U.S. dollar may be made there with a positive feedback for the greenback.

EUR/USD fell today from 1.5452 to 1.5401 with a daily low at 1.5386 as of 8:03 GMT. GBP/USD remained virtually unchanged today opening at 1.9455 with a close at 1.9447 so far; the daily low was at 1.9428. USD/JPY rose from 107.87 to 108.00 today.