US Dollar pushes on insistent for Risky Assets

The US dollar pulled back dramatically on Tuesday, particularly in opposition to the high-yielding commodity dollars, amidst a pickup on the go for carry and a development in investor sentiment. Whilst instability stays comparatively high, overnight interest rates have somewhat calmed down, causing the worldwide stock markets to bound higher. With the US dollar being indicated as a “risk free” asset, it is this boost in risk appetite that is directing the currency to low. Is this move going to keep on going? That as well rely on risk tendencies, but one thing we can rely on is unsatisfactory US data on Wednesday.

British Pound dropped almost 3% under 1.50

The British pound dropped sharply under 1.50 against the US dollar for the 1stt time from 2002 on Wednesday after the Bank of Englands periodical Inflation Report, in which they improved both their escalation and price rises predicts considerably lower. The BOE’s estimates forecast that the UK financial system is going to contract throughout 2009 and CPI is going to fall “well below” the governments two percent goal and could even drop negative, indicating deflation, if not it cuts rates additionally. Consequently, Credit Suisse overnight index swaps have moved to nearly entirely price in a 50bp rate cut by the BOE throughout their next conference on December 4, but this may move even more in imminent weeks as BOE Governor Mervyn King stated that interest rates may drop much lower from present stages, and declined to exclude cutting rates to zero.

Japanese Yen controls as need for carry trades stays dull

The Japanese yen has traded very sourly recently, but stays under its October 24 highs where the low-yielding currency facing serious resistance against most of the majors. One of the important factors to estimate the steadiness of the trend for the Japanese yen has been the US stock markets, and the opposite connection between the Dow and the yen (and US dollar) has been something we have been seeing regularly. Friday’s price movement was a just right example of this, as the yen finished the day up 1.8 % vs the euro and more than three % against the Australian dollar and New Zealand dollar whilst the Dow forced 3.82 % by the end of the day. Going ahead, we believe this correspondence is going to remain and the odds are for further Japanese yen strength.

European Stock Markets

European stock markets fell Tuesday following Asian losses amid further gloom about the state of the world economy and the banking systems prospects in particular. The FTSE 100 index of leading British shares was down 63.37 points, or 1.5 percent, at 4,069.79, while Germanys DAX was 64.85, or 1.4 percent, lower at 4,492.42. The CAC-40 in France was down 47.79, or 1.5 percent, at 3,134.24. Banks across Europe were particularly badly hit by recession fears after Citigroup announced it would cut thousans of jobs, with Barclays PLC down 6 percent, HBOS PLC another 12 percent, Deutsche Bank AG 5 percent and Commerzbank AG 6 percent. "There is huge uncertainty hanging over the markets head, and banks are really out of favor," said Howard Wheeldon, senior strategist at BGC Partners. The morning losses in Europe follow similar drops in Asia. Tokyos Nikkei 225 stock average fell 194.17 points, or 2.3 percent to 8,328.41, a day after confirmation Japan, the worlds second largest economy, had slipped into a recession. Hong Kongs Hang Seng Index shed 4.5 percent to 13,131.23. The lurch lower in Europe and Asia followed Wall Street, where traders sold heavily on evidence of more economic weakness and Citigroup Incs announcement Monday that it is to cull 53,000 jobs around the world as it seeks to deal with the impact of the financial crisis. The Dow fell Monday by 223.73 points, or 2.6 percent, to 8,273.58. The Standard Poors 500 index fell 22.54, or 2.6 percent, to 850.75. Wall Street futures pointed to a lower open on Tuesday. Dow futures were down 1.1 percent to 8171. Some hopeful signs emerged with the news that inflation in Britain fell in October for the first time in 14 months largely because of cheaper oil prices. Official figures showed that the annual rate of the consumer price index measure of inflation dropped to 4.5 percent in the year to October from 5.2 percent in the year to September. Analysts had expected a more modest decline to 4.7 percent. As a result, the markets are expecting the Bank of England to continue to cut interest rates aggressively over the coming months, with some predicting it to lop off another percentage point of its benchmark rate when it meets again in early December.

Pak Rupee goes up against dollar

The national currency against dollar appreciated by paisa 40 in the inter-bank trading today, as it was being bought at Rs79.30 and sold at Rs79.50. Forex market dealers said that the stability in the value of rupee since last several days gave confidence to the people and spurred positive sentiments among the business community, which prompted exporters selling more dollars in the market. On the other hand, the financial assistance extended by the International Monetary Fund (IMF) further gave impetus to the strengthening rupee in the market. Dollar in open market today was being bought at Rs79.50 and sold at Rs80.

Asian Stock Markets Go Negative

TOKYO: Asian stock markets also witnessed a negative trend Tuesday in the backdrop of yesterdays crash of stock markets in the US and Europe. US major financial group, Citibank announcement relating to the layoff of its over 50,000 employees had further dampened the sentiments of the investors. Following Japans recession and yesterdays slump, the trading today also opened on a negative note and Tokyos Nikkei 225 index was seen plummeted by 1.26 percent. South Koreas Kospi index plunged by 2.3 percent and Hong Kongs Hang Seng index was seen receded by 1.7 percent. Sanghais index was seen rising up by 0.4 percent due to Chinas strong economy and bailout package. On the other hand, Australia and New Zealand stock markets kicked off negative.