October consumer prices inflation report added some new troubles for ECB to worry about as the released 2.6% CPI growth last month exceeded ECB’s target of 2.0%, while the economy growth is not performing at the pace that would allow another rate hike soon.
Recent talks by Federal Reserve Vice Chairman Donald Kohn about possible interest rates cut by the Fed added confidence to the Forex market traders that rely on buying risky currencies with the cheap low risk Japanese yen - so called carry traders.
Li Yang, an ex-adviser of the People’s Bank of China, suggests a great care in handling any changes to the country’s foreign currency reserves (world’s largest), that are currently composed mainly of U.S. dollars. By the Li’s words, it’s not reasonable to change the vast amount of current reserves, but the new income that goes to the reserves can be exchanged to other currencies.
Foreign currency reserves of the Russian Federation grew up for the seventh week in a row and now are at their record high value - $459.6 billion.
U.S. Dollar gained 0.5% against euro today after the Abu Dhabi government bought a $7.5 billion stake from Citigroup Inc. This sum will help Citi to recover from the recent subprime lending write-offs, as this bank announced surprisingly high losses from this kind of lending.
Chinese yuan will definitely see a some kind of revaluation against dollar and other major currencies soon. Jean-Claude Trichet spoke today about his latest endeavor to convince China government to make confident steps towards stronger yuan policy. From his words the Chinese central bank understands the concerns of their trade partners and the steps will be done eventually to make yuan less depreciated.
Canadian dollar depreciated to its monthly lows today after global commodities prices went down. The OPEC warned that they might increase the oil output to counter the possible economical slowdown on oil-importing countries. That message caused a decline in oil prices.
Indian rupee continued its decline against U.S. dollar started more than a 10 days ago. Fueled by the demand for foreign oil, dollar buying weakens rupee as the interbank Forex traders massively sell rupees.
Canadian Prime Minister, Stephen Harper, confirmed yesterday that his vision of latest CAD’s fast and strong appreciation against USD coincides with the opinion stated by Canada’s Financial Minister Jim Flaherty. The surprisingly high strengthening of Canadian currency bears highly speculative nature and is essentially harmful to the Canada’s economy.
U.S. dollar is likely to replace Japanese yen on the carry trade arena as the short currency. According to the currency pairs yield analysis, Great Britain pound, Brazilian real and Hungarian forint combined made over 17% against dollar this year, while buying those currencies against yen yielded only 9%.