Kuwait: GCC to Abandon Dollar | ForexGen

Monday, September 29, 2008

Kuwaiti Finance Minister has said that the Gulf Cooperation Council countries, U.A.E., Qatar and Bahrain specifically, are planning to scrap their currencies’ peg to dollar soon.

Mustafa Al Shimali is confident that other Middle Eastern countries will be doing what Kuwait has done in May 2007. Recently financial officials from the United Arab Emirates stated that depegging is not in the country’s interest, while the commission was established to analyze the possible consequences of such decision.

The U. S. dollar, which is the base currency for the whole GCC region, except Kuwait, dropped 13% against the euro in the last 12 months. Depreciating dollar is believed to be a reason for the elevated inflation rate in the region.

Yesterday U. A.E., Qatar and Bahrain followed the Fed’s decision to lower the rates to stay pared with the U.S. dollar lending rates — they decreased national rates from 2.25% to 2%. Saudi Arabia chose not to follow the decision, spurring the riyal’s growth on the Forex market.

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Yen Falls for Second Day as Stocks Bloom | ForexGen Reports

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Today the yen fell for the second day in a row on Forex as the stock markets rallied and the traders looked for the more high-yielding assets, selling the Japanese currency for dollar and other risky currencies.

Although, the U.S. dollar is also heading for the second weekly gain against the Japanese yen, JPY declined mostly against such carry trade favorite currencies as Great Britain pound (5% interest rate) and South African rand (11.5% interest rate!).

Of course, it’s too early to say that the carry trade is back and the financial crisis can be disregarded in the high-risk Forex trading. Most probably It’s just a short-time shift in the investors’ behavior as the U.S. economy is seen to be recovering and the Bank of Japan stance on the interest rates remains far from hawkish.

Some financial strategists still believe that the USD/JPY bottom hasn’t been reached yet and that a global return to carry trade would be really premature at this time.

USD/JPY rose from 104.38 to 104.68 today after reaching daily high at 105.3 — its maximum value since February. Yesterday USD/JPY grew by 0.4%.

FOMC Reduces Rate, Hopes for Better | ForexGen Announcment

Forexgen Announced Today That

The Federal Reserve lowered the federal funds rate from 2.25% to 2% today during the scheduled meeting of the Federal Open Market Committee, saying that the current measures may be enough to remove the risks.

As the majority of the traders expected, FOMC reduced the interest rate for the U.S. financial market by 25 basis points and signaled that, although the current situation on the markets is weak and the inflation is starting to grow, the reduced rate should help the economic growth and will lower the risks:

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

Two out of ten FOMC members decided to vote against the rate cutting decision (they preferred to keep the rate unchanged), which means that the next meeting will probably result in no change to the interest rate.

The EUR/USD currency pair reacted with a little volatility on this news and remained inside the daily range, which was quite low.

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Dollar Steady ahead of FOMC Meeting | ForexGen Media

The U.S. dollar continues to head for the first monthly gain against its European counterpart this year as the market participants await the FOMC rate decision and a statement that are scheduled for release today.

According to the interest rate futures, Investors believe that the rate in U.S. will be lowered today by 25 basis points (from 2.25% to 2.00%), but the statement won’t be dovish this time, signaling for an end or at least a pause in the rate reduction cycle.

The dollar is currently poised for the biggest monthly gain against the euro since February 2006. The euro itself is experiencing a slight decline this month against the other world currencies.

The dollar is also heading for its biggest monthly gain against the Japanese yen since April 2004, as the yen has been losing its position on the currency market heavily this month.

EUR/USD on Forex market opened at 1.5571 rate today and after a little upward spike is trading almost unchanged at 1.5561 (as of 8:30 GMT).

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Pound Rises against Euro, Dollar | ForexGen

The Great Britain pound continued its growth against the euro and the U.S. dollar today, even after the housing prices fell again and the chances fore more interest rate cuts by the Bank of England went up.

After some bearish trend movements during the Asian Forex trading session, the pound gained to above the Friday’s close rate against the other world currencies.

Although, the bond rates grew up in the United Kingdom, the economic situation is now attracting only risk-seeking investors, thus the currency is benefiting only from the elevated economical risks.

EUR/GBP fell from 0.7869 to 0.7842 today after losing from 0.7950 to 0.7870 on Friday. GBP/USD gained 0.33%, rising from 1.9837 to 1.9903.

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