Estimates For The Foreign Currency Markets
A small, but too valuable currency to hit the euro area economy.
In the last few weeks everyone is talking about the “currency war” as a new economic weapon used by some countries to protect their interests. Rejecting not so much the idea itself but the presence of the word “war”, analysts say that the global currency market will be dominated in the last three months of this year by a wave of currency devaluations, operations designed to help the domestic economy by supporting certain export sectors, without regard to economic indicators of other states.
There is no more “peace” on the currency market. Speculators play against the dollar with the same enthusiasm with which they played against the euro during the full extent of the European debt crisis. Last week, speculators have spent $ 22 billion in these operations – the highest index in the last two years, according to Reuters. For nearly a month, the U.S. currency was depreciating against the euro, only on Thursday to reach 1.4029 per euro, an unmatched value since January 28th this year.
On the last day of last week, the dollar rebounded slightly. As a signal of attack was considered a warning released by the U.S. Federal Reserve chief, Ben Bernanke, in late August, when he raised the possibility of launching a new program to purchase bonds on the market to give the economy a helping hand.
Experts expect the decision to inject nearly $ 1.000 billion to be adopted in early November. The result of Bernanke’s intervention: the beginning of September, the dollar rate against the basket of currencies of U.S. trading partners lost nearly 7%, while against the euro – about 11%. “The dollar will continue to remain under pressure,” said Brian Kim, from UBS. “The question is who will print more money,” adds Bill Gross of Pimco.
Bad for the European currency
One euro is damaging expensive. A course and more than $ 1.4 was characterized by Luxembourg Prime Minister Jean-Claude Juncker, a bad thing for the euro, even deadly, according to Professor Nouriel Roubini assessment. And the famous financier George Soros said that speculation on the development of a “foreign war hidden not far from the truth.” If China does not honor their responsibilities will be the world leader, global currency system might collapse and with it the planetary economy,” he wrote recently in the American business man pages daily “Financial Times”. Worth mentioning that in February, Soros condemned the same, basically, the euro, to disaster, unless the EU would establish order in the Community finances. At that time, managers of hedge funds, including Soros founded and owned by, had proceeded to a “dinner ideas, aiming to exchange forecasts at all enviable fate of the euro.
European debt crisis broke out and a volcanic eruption and the market expected the dollar and the euro will reach parity. Volume concealed positions against the euro stood, then, to almost $ 60 billion – the highest level since 1999, as finding the analysts at Morgan Stanley. Now, experts reviewed the initial projections. Goldman Sachs expects more than three months euro cost $ 1.4 (previous forecast was $ 1.22), more than half a year, $ 1.5 ($ 1.35) $ 1.55 a year ($ 1.38).
BRIC countries are mobilizing
Exchange about the war were discussed over the weekend, G7 finance ministers, who urged the IMF to become a referee in such disputes. Officials are concerned that many countries such as China, Brazil or Japan, stopped by the appreciation of their exchange market interventions. Since June, when the Beijing authorities have announced a return to a more flexible Yuan, China’s national currency increased by only 2%. Late last month, Japan has done, in turn, to the largest foreign exchange intervention in decades. Avoiding open to take part in such maneuvers, Russia announced through the voice of the Deputy Minister of Finance, Dmitry Pankin, the countries forming the group BRIC (Brazil, India, Russia and China) will fight by all political means renouncing any American initiative control over exchange rates. “The problem is not confined to exchange rates, which are nothing else than the reflection of deeper processes, such as propensity towards savings, investment, investment atmosphere. Letting the BRIC currencies freely surf the recipe is not against all diseases, “said the official from Moscow.
Estimates for the last three months of this year
The experts at Saxo Bank have also outlined the following picture:
USD: The market will focus its attention on the actions of FED in Q4. Generally speaking, the Federal Reserve may take some measures to support the economy, either by the infusion of nearly $ 1.000 billion, or by monetization of the long-term government bonds. However, the dollar appears in the current context, a strong dependence on market morale. In other words, it will grow only in terms of a stock market jump.
EUR: European countries have undertaken measures to tighten fiscal policy in an attempt to fight the debt crisis. But the maneuvers of the market players are not any more influenced by budget deficits, at least not as much as they were over the summer. Much of the negative consequences have already been transferred to the euro. However, it is not ruled out a devaluation of the euro against the dollar.
JPY: Interventions have started! The success or failure of new attempts to prevent excessive strengthening of the yen will depend on the return trajectory of state bonds. However, the yen is likely to slip on a downward slope unstable, including risks related to events under the influence of Asian countries.
GBP: British economy in Q4 will begin to feel the consequences of the austerity program adopted by the government perhaps more acutely than other major European economies. Pound’s fate will depend on investors’ attitude towards risk, because this year the British currency is used as an alternative market to the U.S. dollar.
CHF: Swiss franc collided with a stone wall, when Japan intervened in the currency market. If the Swiss economy will show a slight “cooling”, a quite possible scenario, France will follow a trend of depreciation.11