Market Impacts on Major Currencies

These are some currency updates for all my readers out here. Please recommend your suggestions and views on the same.

EUR

Both the Japanese Yen and the US Dollar grew stronger against the Euro on Tuesday erasing minor losses from earlier in the day. Traders fled the Euro to the Yen and Dollar as new data from Europe showed that producer prices fell 1.3%, a larger than expected drop. Many Forex traders believe that the US and Japanese currencies are a safe bet in times of crisis and it was this that analysts believe prompted the turnaround. The investing and trading community traded down the Euro close to ¼ of 1 percent against the dollar to 1.2841 and ¼ of a percent against the Yen to 114.93 during the Tuesday afternoon European trading session.

The Euro-zone issues were compounded when Germany, the largest economy in the European Union, announced that their retail sales had fallen off for a third straight month. German retail figures showed a .2% decline in December, leaving a negative .3 % drop for the year. This was the first time in over a decade Germany had experienced negative sales growth.

Even with Tuesday’s poor economic data, the European Central Bank is still expected to keep interest rates the same until their March meeting.

JPY

The Bank of Japan (BOJ) announced on Tuesday that is going to begin buying shares of Japanese banks to the tune of 11 Billion US Dollars. The BOJ believes that the biggest risk to their financial services industry is the exposure within the equity markets.

The stimulus plan would commence immediately and would allow for shares that are rated BBB- and above to be purchased until April of 2010. Traders were skeptical that this move would cause a rally in the Japanese equity markets and mark a return of the speculators with an appetite for risk.

Analysts and brokers trading Forex believe that the move will help the Japanese banks in the long run, however the announcement did not immediately trigger a rally in the Japanese currency or equity markets.

The US Dollar gained ½ of 1 percent against the Yen to 89.51. The move was mild and should be the rest of the week as the January 90.00 options on the pair are expiring this week and next. On Tuesday, close to 1 Billion US Dollars worth of USD/JPY options expired.

AUD

The Reserve Bank of Australian cut their key lending rate to 3.25%, down a drastic 100 basis points. The move was widely expected and much of the hype of the move had been traded out in the sessions leading up to Tuesday cut.

The Australian Dollar was up over 1% against the UD Dollar to .6376 as Forex traders helped it climb more than 1 ¼% against the Japanese Yen to 57.09.