The tragedy in Japan is only just now beginning to be understood as various reports come in of thousands of deaths, massive flooding, and nuclear facilities that are in danger. Because of this, traders will have to be pragmatic as far as how they approach the FX markets, especially when it comes to the Yen.
Tag: Foreign Exchange Market
British Pound Continues Gradual Ascent
The British Pound has risen almost 15% against the Dollar over the last twelve months. It seems that the markets are ignoring the fiscal concerns that sent the Pound tumbling in 2010, and focusing more on inflation and the prospect of interest rate hikes. At this point, the Bank of England (BOE) is now racing with the European Central Bank (ECB) to be the first “G4″ Central Bank to hike rates.
Stocks Fall on Concern Japan’s Quake to Hurt Growth; Treasuries, Euro Gain
Global stocks slid, following the biggest drop in Tokyo since 2008, and Treasuries gained amid concern Japan’s biggest earthquake on record will hurt economic growth. The euro rallied as European leaders agreed to expand the region’s rescue fund.
The Standard & Poor’s 500 Index fell 0.6 percent to 1,296.39 at 4 p.m. in New York, paring a drop of as much as 1.4 percent as energy shares rebounded. The Nikkei 225 Stock Average plunged 6.2 percent, with about $285 billion in equity value erased from the Japanese market. Ten-year Treasury yields lost 4 basis points to 3.37 percent. Oil reversed losses after dipping below $99 a barrel. The euro rose against 15 of 16 major peers.
Companies that operate nuclear power plants or supply the fuel helped lead stocks lower, with Entergy Corp. down 4.9 percent in New York and Cameco Corp. tumbling 13 percent in Toronto, while natural gas rallied amid speculation that the atomic-energy industry will suffer as Japan works to contain radiation at damaged reactors. Tiffany & Co. and Coach Inc. lost more than 5.2 percent for the biggest declines in the S&P 500 on concern sales of luxury goods in Japan will slow.
Currency Investing: Where to Turn When the Dollar, Euro and Pound Let You Down
If you’re looking to short Western currencies, one possibility is to short them against emerging-market currencies, such as the Chinese yuan, the Indian rupee, the Brazilian real and the Russian ruble.
India and Brazil are running large government budget deficits, in spite of their amazing booms, and both currencies are highly vulnerable to a sudden monetary tightening or a downturn in the global economy.
China, tightly manages its currency. There is certainly potential for the yuan to rise, provided that China maintains its present policy of allowing fairly free inflows of foreign capital while barring outflows of its own savers’ money.
Canada and Australia are reasonably well-run countries with large commodity exposures. So they should do well as long as the current commodity boom continues.
In the Asia-Pacific region, South Korea, Taiwan, and Singapore all have superbly-run economies that are structurally sound.
A currency portfolio that contains those five currencies – the South Korean won, the new Taiwan dollar, the Singapore dollar, the Canadian dollar, and the Australian dollar – could thus be relied upon to maintain its value better than most.
Fed Keeps Pedal to the Metal as Egypt Unrest Weighs on Markets
Stocks swaggered through the first four days of the past week with their usual devil-may-care attitude, then tripped into the final three hours on Friday amid scenes of civil unrest in Egypt. At the final count, the Dow Jones Industrials closed down Friday by 1.4%, theS&P 500 fell 1.8%, theNasdaq fell 2.5% and the Russell 2000small-caps sank 2.5%.
For the week, the Dow was only down 0.4%, though, while the S&P was off 0.5%, the Nasdaq was flat and the Russell 2000 small-caps were actually up 0.3%.
Click Here to see how the unrest in Egypt will drive the markets…