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US dollar trading relatively flat against euro and yen
US Federal Reserve Chairman Ben Bernanke’s statement that the central bank will act to encourage growth has received mixed reactions. Bernanke also felt that unemployment rates in the US will take a long time to fall. Forex experts believe that the first statement will help raise the US dollar rate, as exporters from other countries would try and sell to US companies and consumers. Other experts feel that since quantitative easing has not been formally announced, there is no real expectation of rising US dollar rates.
The EUR/USD trading rate on Wednesday (8:37 AM London time) was $1.2292. It was relatively unchanged. The USD/JPY rate was at 79.00 levels, but here the yen is expected to gain further unless the Bank of Japan intervenes.
Euro struggles to gain versus the US dollar
At 8:37 AM on Wednesday in London, the euro was little changed against the greenback at $1.2292 per euro. Earlier, the euro had weakened to the levels of $1.2267. Similarly, against the yen, the euro was trading at 97.17 yen, having earlier hit lows of 96.88 yen.
It has been more than 24 months since Europe’s fiscal crisis blew out with the bailout of Greece. The Eurozone region’s economy continues to be in a slowdown mode despite austerity measures and rising bond yields. Experts feel that in a long term scenario, the euro currency may lose a lot of its value. In the short term, they feel that some gains are still possible for the euro. However, with the US economy being in a meandering state as well, global growth concerns are not just limited to the Eurozone.
Japanese yen expected to hit 12-year high against euro soon
The news on Wednesday was that the Japanese yen may hit a 12-year high against the euro. At 8:37 AM in London, the EUR/JPY rate was 97.17 yen. Analysts feel that the rate can go to 95.00 yen or even the 92.00 yen level, as the risk off sentiment has been constant. The Bank of Japan’s indecision on cutting interest rates also does not help in lowering the yen’s value. Japan’s Finance Minister has said that the Bank of Japan will take action in the near future, if needed.
Against the dollar, the yen was trading at the 79.00 yen level. The dollar is expected to gain till the 83.00 yen level is reached, according to experts.
Crude oil prices fall after reaching a 7-week high on Tuesday
Oil prices fell on Wednesday after reaching a 7-week high on Tuesday. This fall in prices was due to further concern about China’s slowing economic growth and a profit forecast cut for companies in Europe.
Chinese Premier Wen Jiabao has indicated that China may face some labour problems in the near future, which will impact economic growth. He has even gone on to say that the problems may reach “severe” levels. The oil markets will definitely view this negatively, as China is the world’s second biggest consumer of crude oil.
On the New York Mercantile Exchange, oil was trading at $88.59 per barrel, down by $0.63. In London, Brent crude was at $103.22 per barrel, a drop of 0.8%. These prices were taken at 2:57 PM, Singapore time.