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Home » Online Forex Trading Blog » Dollar Steadies

Dollar Steadies

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Poor manufacturing data from China, the US and Germany led to more concerns about weakening growth in 2013 spurring slides in the euro and USD.  However, the yen failed in continued rallies to test the dollar’s 100 yen threshold.  Meanwhile, the Australian dollar fell to a six-week low against the USD. Volatile Chinese manufacturing declines have shaken the AUD.

The euro would have lost more ground were it not for sentiment that the ECB would opt to lower rates below the historic 0.75 percent current interest rate. It is expected that the disappointing German manufacturing output coupled with declining manufacturing activity from China would hurt projected global growth. The world’s two largest exporters have performed erratically in 2013 and the US downward manufacturing shift points to some paring in that country’s GDP.

Investors and analysts are anxiously awaiting news from the Bank of Japan (BOJ) on Friday. New data regarding Japan’s capital flows will be released on Thursday and over those two days, forecasters will get a more accurate portrayal of how the central bank’s easing initiatives will shape up in future months.

On Monday, indications from ECB policymakers confirmed that the bank was less concerned with inflation than growth. The euro fell to 128.36 yen and to 1.2971 USD. Since an early April low of $1.2740, the euro has rallied settling comfortably in the $1.30-$1.32 range.

The decline in German manufacturing outweighed the first positive news from France in some time. Speculation by several investment houses points to greater declines in the euro during the remained of 2013. The region remains plagued by an extended recession.

A rate reduction will  not ease the recession. Further investment by the ECB and other initiatives are likely to be unveiled. There is a movement to ease the austerity measures that have dominated the culture.

Little Doubt About How Japan Will Proceed

Easing is an unquestioned theme in Japan. The central bank is expected to unveil deep and sustained easing policy in the upcoming meeting. There seems little doubt that the dollar will break the 100 yen barrier soon.

Yields in traditionally safe haven treasuries like the bund and US Treasuries turned downwards on Monday and early on Tuesday. At the same time, equities in Europe gained a little strength as speculation about a rate decrease bolstered sentiment.

Nick Kounis, head of macro research at ABN-AMRO, told Reuters, “Right now we are in a place of sub-par global growth, and the euro zone is lagging behind, stuck in recession. It makes us more confident of an ECB rate cut in May, but really the ECB should be doing more and thinking of other ways to stimulate growth.”

The US 10-year note rose 9/32, yielding 1.664 percent. This marks the lowest yield in 2013.

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About the Author -

Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses. Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.

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