Forex correlation with the S&P 500, oil and gold prices keep on doing business at the highest point. The currencies like the Australian Dollars are very outstanding and are an alternative for other financial groups. The AUDUSD goes on having a close link to Gold, the S&P 500, and major hard supplies prices. As the currency offers the maximum short term result of any G10 currency, it indicates that the Australian Dollar is more lucrative in comparison to Gold or the minimum yielding S&P 500 position. Forex correlations also maintain a strong stand abroad. The Japanese yen is the clear indication to its position overseas.
The FX moves on trade linked currency and earlier lost its connection to broader ‘risk’ as it gradually rose higher in comparison to US Dollar regardless of S&P 500 profits. The FX trader resumed the confidence and started stacking into JPY-short positions in spite of the risk sentiment. This points out that the JPY carry trade is vibrant and has overcome that current ‘risk ‘rally. Analysis reveals that the Australian Dollar has a strong association with the Gold prices, because the AUD and the precious metal offer magnificent bets in opposition to the US Dollar weakness. Among the G10 currency, The Australian Dollar specially offers the benefit of the maximum short- term interest rate. As a result the traders need to pay the storage or the carrying cost of Gold. The Australian Dollar provides an alluring alternative to bet against the Gold strength.
The varied changes in the geographical and the political scenario around the world bring about a dramatic change in the financial market. The traders need to be extra alert on the financial market rise and fall. A regular tracking of the economy and the financial markets, analysis of the past thirty day calendar, study of graphs and charts offered can lead to an effective trading . Right decision to buy or sell a share at the right time is an art that needs to be mastered and keeping alert and a watch on the Australian Dollar can be useful for the traders.
There are a number of overseas foreign exchange trading companies on various internet and trading portals attracting the people by offering them great as well as guaranteed high returns on online forex trading. Till the date, a large number of people have lost huge amount in these type of online forex trade via internet portals. Keeping it in view, the Reserve Bank of India (RBI) has banned such type of payment transactions by asking credit card issuing companies so as to put stop on these illegal forex trade practices.
It is noteworthy here that according to the regulations under Foreign Exchange Management Act 1999,” resident Indians are not allowed to trade in foreign exchange whether it is in domestic market or overseas”.
According to a spokesperson of the RBI, it is easy to find ads by these fake internet or online portals. They exhort to trade in forex and pressurize the public to make their initial investment in Indian rupees (INR). In addition to this, In addition to this, these companies even appoint agents who personally contact easy-to-target people to take forex trading and accept investment scheme referred by them. People are enticed with lots of promises regarding disproportionate or excessive returns on the amount invested.
Public is asked to make the margin payments to complete transactions of these kind of forex trading via credit cards or cash deposit in the various banks in India.
The RBI has asked card issuing companies to remain alert against allowing payments for these unauthorized transactions.
Bank accounts in the name of individuals or concerned people have been opened at different branches of banks to collect the money from the public. So, the banks have also been asked to remain extra vigilant regarding such type of transactions.
Any Indian resident collecting or making such kind of payment in or outside the country is prone to be proceeded against with the violation of regulations pertaining to Know Your Customer norms as well as Anti Money Laundering standards and also for violating FEMA (Foreign Exchange Management Act).
On April 8, 2011, the US dollar went down to 75.009, versus the currencies of six major US partners. This is the lowest rate of the dollar since December 2009. It was the consequence of the damped unenthusiastic demand of the currency by a number of raw materials and also due to the disagreement among policy maker about the budget.
In November 2009, the US dollar witnessed the record low of $1.33 to the Euro at the end of the month. There were signs at this time that foreign central banks that have done heavy investment in treasuries in the US as well as in other type of debts were thinking of shifting apart of their funds out of financial markets of the US. In addition to this, the US dollar also had record four-and-a-half year low against the yen, a nine-year record low against the Swiss franc, a twelve-year record low against the Canadian dollar and record low of sixteen-year against the New Zealand dollar. As it was not sufficient, the increasing failure of trust in the US dollar also resulted in a 16-year high gold price which was $455.
The lawmakers in the US Congress were not able to reach at mutual decision regarding the federal budget which could easily led to the first blackout of the government for the first time in 15 years. Consequently, the US dollar while tracking other competent currencies fell down to the lowest rate since 2009. the another reason behind the stumbling of the US dollar was the speculation that central banks of the developed countries will be tracked by the Federal Reserve in the matter of raising interest rates.
On the other side, the global economies showing the signs of recovery as the commodities in the world market continue to advance and thus attractiveness towards growth related currencies has increased. The rise of 1.1% is seen in the Thomson Reuters/Jefferies CRB index while the growth rate of 1.6% was noticed in the German industrial production in February though it was expected to grow just by 0.6%.
Even today it cannot be said whether we have overcome the worst possible debt crisis in Europe or not or it is just a calmness before the arrival of the storm. However, whatever, may be the case, the crisis may not be restricted to Greece only but chances of its spreading into Spain, Italy and Portugal have forced financial analysts to think seriously about what once was the main are of consideration that it might be possible that Euro would disband and even vanish completely.
This matter must not be taken lightly as it is noteworthy here that four economies out of 10 largest in the world use Euro as currency. According to a rough estimate around 330 million Euros are used everyday in Europe. At the same time, about 200 million people use currencies which hare attached to the Euro. It holds the status of the second widely-used currency as a reserve currency as approximately one-fourth reserve of the world is in Euro.
Let’s suppose if the disbanding of Euro occur hen the very first consequence would be a great deal of volatility and commotion. Another consequences would be that there would be an increase in both the costs of doing business with Europe and within it. Since the money is not exchanged for free by banks, corporate would be required to pay higher transaction costs.
Another consequence would be that the disbanding of Euro might result in supporting the dollar’s value; if not on large term basis but on a short to medium term. Quite possible that countries presently using Euro as t heir reserve currency would like to have the France franc in the place of Euro, but most likely it won’t be possible on one-to-one basis. The result is obvious as more reserves would be shifted into other currencies and among these the dollar would be the most logical one. It might seem good at present but it would not be appropriate for exporters.
In the end, the Euro has support of countries like Germany, France and the Netherlands but it shorts of patience. However, whatever may be the possibility the investors are keeping an eye over it.
Japan witnessed one of the worst tragedies in the world after the earthquake and tsunami struck it on March 11, 2011. The tragedy killed thousands of innocent people and damaged the property worth hundreds of billions. Obviously, the impact of the disaster on the global economy was obvious and thus affecting Yen against other major currencies and also affected GDP growth of the country as well as other nearby countries.
As far as the cost estimate of the disaster is concerned, it will not be possible to estimate it correctly for years to come but according to Japanese government, the cost of damage range between USD 200 billion to USD 300 billion. This cost estimation makes the disaster in Japan the costliest natural disaster in history.
If we talk about the impact of disaster on currency then initially the reaction noticed was the strengthening of the value of Yen against USD. It was something which unexpected to a number of investors or traders. It is due to the fact that the large amount is required to repair the physical damage that took place due to the disaster. However, the value of Yen continued to rise till it reaches to about 76 yen to dollar which was almost equal to the value of Yen post World War-II.
There have been speculations that the reason behind the strengthening of Yen against other currencies was the traders expecting that the government and corporations would be required to liquidate part of their large part of their non-yen denominated investment to fulfill the fund requirements in Japan for relief and reconstruction.
It must be noted here that after China, it is the Japan government who is second largest owner of United States treasuries. The amount leads to $886 billion in holdings by March, 2011. The market must have expected a part of this treasury and other investment to be liquidated.
In the end, it can be easily calculated that earthquake and tsunami had ripple effect on the currency as well as equity markets. Additionally, it also has yet to known impact on economic growth of Japan also.