Dollar retreats again on good corporate news, Euro reverses after German data

USD

The Dollar slid on Tuesday in very up and down trading against most currencies, after US Investment Bank, Goldman Sachs, reported better than expected earnings and US retail sales surpassed expectations.

This raised hopes for an economic recovery and continued the risk appetite rally that began on Monday. Retail sales rose by .6% after it was expected that a rise of .2% would prevail.

Goldman Sachs, which is one of the most prestigious institutions on Wall Street, was the recipient of nearly 20 Billion Dollars of federal money in December, after posting their worst losses on record. They have since paid back the federal money and still managed to squeak out a profit in the second quarter.

At 10:00PM GMT, the US Dollar was down .35% to the British Pound to 1.6274, down 1.03% to the Canadian Dollar to 1.1385, down .63% to the Australian Dollar to .788 and down .32% to the New Zealand Dollar to .6342. The Dollar did rise .7% to the Swiss Franc to 1.0911.

EUR

In a switch from Monday’s Forex trading session, the euro fell on Tuesday as a result of less than spectacular data out of Germany.

The German think-tank, ZEW, came out with their first drop in consumer sentiment in nine months. Monday the Euro responded well to comments from the European Central Bank President, Jean-Claude Trichet, who eluded to a recovery later this year.

At 11:50PM GMT, the Euro was down .8% to the US Dollar to 1.3936, up .1% to the Yen to 130.17, down .65% to the British Pound to .8556, down 1.55 to the Canadian Dollar to 1.5834, and down 1.1% to the Australian Dollar to 1.7647. The Euro did rise against the Franc to 1.5205.

Pound Slides against Euro, Dollar as Pressure on Prime Minister Rises

The pound posted the fourth day of losses in a row against the U.S. dollar as a serious political crisis deepens in Great Britain, where Prime Minister Gordon Brown’s Labour party is losing influence significantly.

Negative factors weighing on the pound are coming from virtually everywhere on the political sphere in the United Kingdom and the European Union, making the pound to reverse an uptrend started by signs of economic recovery. Prime Minister Gordon Brown is suffering sequential calls to resign, as his party had the weakest results in the European Parliament elections, reaching just 15.3 percent of voters, a drop of 7 percent from 2004. David Blanchflower, former Bank of England policy maker, affirmed that the central bank may continue its intentions of buying assets with newly created money, in order to rescue the shrinking British economy, adding pessimism to the pound outlook.

As long as Gordon Brown resists to resign, the pound will continue its bearish trend, according to currency strategists. The United Kingdom is in its worst economic moment since the end of the Second World War, and Gordon Brown is considered unable to rescue Great Britain from the current negative scenario. The pound is likely to continue weak, and as long as Brown remains in power, it’s rather improbable that the pound will recover versus the main currencies.

EUR/GBP rose slightly to 0.8738 from a previous price of 0.8743. GBP/USD traded at 1.5868 from 1.5972

Dollar Climbs on Interest Rates Raise Speculations

The dollar gained versus the main currencies as speculations that the U. S. Government will raise its interest rates by the end of the year, consequently causing a bearish day in equities markets around the world.

High-yield currencies like the South African rand had a negative day against the dollar as the Fed fund futures showed a 40 percent possibility of interest rates raise for the second semester, a high jump from the previous 13 percent chance from a week ago. The yen was the only main currency that did not have a negative day versus the dollar, as domestic favorable news like the falling number of bankruptcies improved confidence among merchants and Japanese investors, making the greenback to end a rally that brought the yen to a one-month low. The U. S. currency also posted sharp gains against the Great Britain pound, as the government crisis in the U.K. deepens, and the future of Prime Minister Gordon Brown is uncertain.

There is a wave of optimism favoring the greenback, according to economists. Several factors indicate for a stronger dollar to come for the following weeks, not only a sequence of positive reports and speculations is raising the traders’ confidence to buy assets in dollars, a consistent sentiment among specialists that the dollar has been excessively sold over the past two months may help the dollar to enter a significant uptrend.

EUR/USD traded at 1.3900 from a previous price of 1.3969. GBP/USD traded at 1.5800 from 1.5981.

U.S. Jobs Report Pushes Dollar Up Against Euro, Pound

The greenback had the highest rally since April against the euro, pound after a U.S. employment report indicated that fewer jobs were cut than forecasts predicted, fueling investors with optimism towards the North American economy.

The U.S. dollar gained significantly against most of the main world currencies, as the report bringing better than expected news for the employment sector adds to the already growing evidences that the global recession might be ending, and being the United States a key-country for the world economy, favorable news are regarded by traders as an important opportunity to buy assets in dollar, boosting the American currency and stock markets as well. The data on U.S. employment also brought the yen down, regarded as a refuge currency, it was once again hit by investors looking for higher-yielding opportunities.

Analysts say that positive reports that once were increasing attractiveness to high-yielding assets and making the dollar to lose value, now are favorable to the U.S. currency, as a solid economy keep its currency consistent and sustainable. The dollar has been suffering losses since signs of an economic rebound came from Asia, when investors start purchasing higher-yield assets in the equities market and commodity-linked currencies like the Aussie, but a new uptrend might start for the greenback and its economy starts to revive.

EUR/USD fell and closed the weekly session at 1.3967 from 1.4186. GBP/USD traded at 1.5978 from 1.6185.

Brazilian Real Demand Rises as Commodities Rally Strengthens

The Brazilian currency continued its rally against the dollar, euro, as the demand for commodities continues to rise on improved economic conditions mainly in Asia, spurring demand for assets in emergent markets.

Since the price of commodities rebounded as the global slump started to show its first signs of recovery, the Brazilian currency is witnessing an impressive rally fueled by a combination of favorable factors in the global financial system and economy, to the point that the national central bank eventually buys foreign currency to avoid the real to strengthen excessively, like happened this Thursday. Two-thirds of Brazilian exports are commodities, being these mainly oil, iron ore and soybean, and their price increase is helping the real to hit record highs on a weekly basis, being one of the most profitable currencies for traders since the global recession started to ease, two months ago.

The rise in commodities has been helping the Brazilian Stock Exchange to rebound after a deep bearish trend in which it lost more 30 percent of its highest value before the crisis, and following commodities and stocks, Brazil’s real is showing an unique performance against most of currencies. Analysts reaffirm that as long as the optimism continues, investors will tend to buy higher-yielding currencies like the real, and the growing demand for commodities will continue to boost the Brazilian currency attractiveness.

USD/BRL traded at 1.9353 from 1.9417. EUR/BRL slid to 2.7170 from 2.7530.

Brazilian Real Falls from Eight-Month High as Stocks, Commodities Drop

Brazil’s Real had the largest drop in six months falling 2.2 percent against the U.S. dollar and declining from an eight-month high, as commodities and stocks declined, reducing capital influx to South America’s most influential economy.

After a rocketing rally that made the real to rise 24.6 percent since March 2, the real tumbled the most in six weeks, after a negative day in stock and commodities markets. The main reason that affected the real’s price this week was the remittance of profits from foreign investors that purchase assets in Brazil’s BOVESPA, the main national stock exchange market, which due to its highly volatile profile, attracts investors that often buy assets in a down market, sequentially selling it after hitting a target price, returning the capital to its country of origin, like happened this Wednesday.

Brazilian specialists relate the U.S. dollar’s gains against several currencies to the real’s decline. Brazilian exporters trade mostly using the greenback, and the outflow of profits from the national stock market also weighed on the South American currency. The real may continue its rally against the dollar, euro and the pound, as long as the commodity market remains heated, spurring demand for Brazilian exports and attracting investors to the stock exchange market.

USD/BRL traded at 1.9640 from 1.9267, the sharpest rise in six weeks, while the EUR/BRL rose from 2.7587 to 2.7811.

Swedish Krona at Six-Week Low as Concerns Rise in Latvia

The Swedish currency hit a six-week low level after speculations rose that Latvia will devalue its currency, as an attempt to save the country from a deep recession, consequently affecting negatively loans held by Swedish banks in the Baltic Nation.

According to a note posted this week by Riksbank, an economic deterioration in the Baltic countries is an imminent risk to Swedish banking institutions, since Latvia’s financial system is highly linked and dependent on the Scandinavian nation’s funding. Mareks Seglins, the Latvian Justice Minister affirmed that the country’s currency should end the system that maintains it pegged to the euro, and this declaration impacted directly the Swedish krona, causing it to fall more than 4 percent against the euro since June 1. Since Latvia’s independence, Sweden is the main fund provider in the private loan market for the Baltic nations.

The risk of devaluation for the Latvian lat is considered high, according to analysts, even if they expect that a cooperation between the Eurozone and Sweden to maintain the lat pegged to the euro, the pressure is significant and rising. ING Groep NV affirmed that there is a 50 percent chance that the Latvian currency will be devalued during the next 12 months, which could ease the ongoing recession in Latvia, but cause an important impact on the Swedish banking sector and its currency.

USD/SEK traded at 7.6256 from a previous rate of 7.7160. EUR/SEK also fell from 10.9060 to 10.8500.