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Threat Of Middle East Reserve Move Stresses The Dollar

Submitted under Uncategorized, Articles, Others by miftahx on Tuesday 4 April 2006 at 7:57 am

LONDON (Dow Jones)–A possible move by Middle Eastern central banks to cut the dollar’s share in their foreign currency reserves is placing new pressure on the already shaky currency.

A report on Wednesday that a United Arab Emirates central bank will decide next week whether to shift a portion of its reserves from the dollar to the euro renewedlong-term speculation that other Middle Eastern banks would make the same change.

Some analysts still question whether the currency market’s focus on this topic is justified, given the relatively small amounts involved in the U.A.E.’s reserves. But with the dollar’s popularity already wobbling with signs that U.S. interest rate hikes are ending, the fresh speculation put the greenback under pressure.
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Japanese Forex Trading Preview

Submitted under news, Articles by miftahx on Tuesday 7 March 2006 at 3:40 am

by Korman Tam

The dollar kicks off the week on a softer tone against the euro as traders continue to reward the single currency on sentiment that further rate hikes may be imminent from the ECB. The euro remains buoyed versus the greenback, near the 1.2050-level. The key driver in the currency market will continue to be central bank monetary policy, with the Bank of Canada, Bank of England, Reserve Bank of Australia and the Bank of Japan, all slated to announce rate decisions this week. Among the Bank’s, only the BoC is expected to lift rates, while the market is essentially divided on whether the BoJ will move.

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Euro Takes Over from Yen as Dollar Sits Back

Submitted under news, analysis by miftahx on Tuesday 7 March 2006 at 3:34 am

by Ashraf Laidi

A 6-month high in the US services ISM may have stabilized the dollar from its losses earlier in the week, but did not prevent the currency from ending the week lower against the majors. The euro’s highest close since Feb 2 suggests further upside next week and possibly taking out the 200-day MA. The services ISM jumped to 60.1 in February from January’s 56.8, beating expectations of 59. The employment index pushed up to 58.2 from 51.1, while the prices index eased to 64.8 from 67.2.

Separately, the University of Michigan’s consumer sentiment index final February reading fell to 86.7 from 91.2 and February’s initial 87.4.

There was also a strong increase in the Eurozone’s services PMI to 58.2 in February from 57, overshooting expectations of 57.3. The survey provides the economic justification for this week’s ECB rate hike and the accompanying growth upgrades.

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Inverted Curves, Carry Trades & the Dollar

Submitted under Articles, Ideas by miftahx on Tuesday 7 March 2006 at 3:30 am

by Ashraf Laidi
3/2/2006, Forexnews.com

What are the iimplications for the dollar, if any? Over the past 30 years, the US yield curve has almost always occurred during periods of rising interest rates. These included Q3 1978-Q2 1980, Q3 1980-Q4 1981, Q1-Q2 1989, most of 2000 and the current inversion. The only exception was during summer 1998, when the 10-2 yield spread posted a modest -5 basis points as a result of the drying up in capital market liquidity, rather than actual increases in the Fed funds rate. The lack of rate hikes was also the reason why the modest inversion did not precede an economic slowdown or a recession as was the case in other inversions.

Inverted yield curves occur when short-term interest rates exceed longer-term ones, more specifically, when the yield on 2-year notes rises above that of 10-year notes. Yield inversions usually presage economic weakness because they narrow money center banks?profit margins by reducing the difference between interest rates on loans and on deposits. Hedge funds selling short term treasuries and buying long end bonds become squeezed out when the cost of their short-term debt increases relative to their longer maturity holdings. And finally rising short-term rates increase homeowners?interest costs on their floating rate mortgages, thereby reducing the demand for new and existing homes as well as weigh on the value of house prices against which homeowners are borrowing.
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Threat Of Middle East Reserve Move Stresses The Dollar

Japanese Forex Trading Preview

Euro Takes Over from Yen as Dollar Sits Back

Inverted Curves, Carry Trades & the Dollar