International Trading


 Of late the U.S dollar has experienced across the board downside pressure as the markets speculate over the size of the Federal Reserve’s second round of quantitative easing. Although, there are schools of thought argue the effects have been fully priced in, and that any disappointment on the size of asset purchasing will result in a dollar rally. After Ben Bernanke’s calculated speech on Friday the dollar has bounced off its lows as the prospect of a surprise diminishes, and the markets consider the validity of further dollar selling. 

• Yields on debt issued by some of the European Peripheral Nations have narrowed against the benchmark German bund, and the CDS market has eased. Improvements in the bond market coincided with ECB member Axel Weber’s hawkish rhetoric over the central bank’s role as buyers of debt resulted in EUR/USD temporarily breaching the 1.4000 handle at the end of last week’s trade. However, ECB president Jean-Claude Trichet failed to continue in a hawkish tone as he was quoted as saying that Weber’s views would be met with disagreement from other ECB members. The single currency is off the highs and is currently priced at 1.3900. 

• The Japanese Yen is the only major currency to trade slightly higher as the failed intervention by the Bank of Japan has led to a crisis of credibility for the central bank. After much jawboning, and a wasted $25bn the Yen continues to strengthen against the dollar. USD/JPY continues to grind higher despite the pair approaching the key 79.722 all time low. U.S dollar funded carry trades are growing in popularity as the Federal Reserve keep rates at all time lows, and eye further easing measures. 

• AUD/USD is trading off the parity highs as traders wait for the RBA minutes from October’s meetings. The RBA kept rates on hold at 4.50% as the stronger currency off-sets potential inflation. Australia and their currency have benefitted from China’s appetite for resources as they continue to out grow much of the developed world.