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USD and AUD Currencies

USD FOREXThe US dollar stayed close to a three-week trough against other primary currencies fueled by reservations the US central bank will still increase cash rates by the end of this year.

On the contrary, the Aussie dollar went up 0.1 percent to $0.7341 and remained firm after going up four percent last week for the largest weekly gain since the latter part of 2011. It touched a new seven-week peak at $0.7347.
However, the surge of AUD and other emerging currencies in Asia can just be momentary, according to a senior international markets analyst from Sumitomo Mitsui Banking based in Singapore.

Some economic observers share the view that this will be temporary and it is not advisable to bet aggressively on the Australian currency.

The FOREX market may follow trade statistics from China along with economic indicators from the US like retail sales numbers as well as CPI this week.

The index for USD traded at 94.780 before reaching a slump of 94.692 which is the weakest since September 18.
The euro also climbed 0.1 percent up to $1.1372 and set a three-week peak of $1.13875. The US dollar was steady against the Japanese currency at 120.21 JPY.

Meanwhile, the US dollar retreated last week versus commodity currencies.

At the moment, the focus will be on whether there will be an increase in commodity as well as up-and-coming market currencies or a transitory rally propelled primarily by position squaring or simply a continuing uptrend.

Posted in FOREX News

Sharp Devaluation of Currencies in Emerging Markets

emerging markets newsThe abrupt decline of currencies in emerging markets (Africa, Europe and Middle East) versus the USD during the year increases risks confronting banks worldwide, according to the ratings services of Standard & Poor’s.
These countries include Azerbaijan, Belarus, Georgia, Kazakhstan, Nigeria, Russia, Turkey, and the Ukraine (in alphabetical order).

The ratings agency said Kazakhstan, Nigeria and Ukraine high-level foreign currency loans that can generate huge losses in their respective banks.

Meanwhile, banks in Belarus, Georgia and Turkey depend too much on FOREX funds and their capacity to refinance said loans has become risky.

Standard & Poor’s also revealed foreign currency deposits are responsible for more than 50 percent of total deposits in Azerbaijan, Kazakhstan, Belarus, Georgia, and Ukraine.

On the contrary, more banks in the Asia and Pacific are in much better condition because these institutions have enough protection against currency depreciation.

S&P officials attribute this to minimal exposure of foreign currencies as well as hedging policies.

However, a few Asian currencies have dropped considerably against the US dollar during the last two months. Malaysia’s ringgit and Indonesia’s rupiah are two of the worst performers but banks in these countries obtain funds through local deposits. In China, the deteriorating renminbi can turn out to be positive for the economy and banking industry, S&P asserts.

FOREX markets in Latin America present a different picture. S&P maintains concerns regarding high amount of bank loans denominated in foreign currencies and anticipates currency risks to become credit risks.

The banking system of Peru depends on external funding that can lead to higher refinancing risks for its banking sector. Foreign funding is quite scarce in Brazil, Chile, Colombia and Mexico. It is also fully hedged which means that this does not have any instant effect on these nations’ banking systems.

Posted in FOREX News

Yuan Moves Past Yen as 4th Most-Used Currency

yuanThe Chinese Yuan surpassed the Japanese Yen to emerge as the fourth most-used legal tender for international transactions. It shook off a devaluation to reach this highest ranking and bolstered its claim as reserve currency.

Ratio of payments denominated in the CNY went up from 2.34 percent (July) to 2.79 percent (August) based on the statement released by the Society for Worldwide Interbank Financial Telecommunications. The Yuan also came in second for international issuance for letters of credit according to value with (9.1 percent share) compared to 80.1 percent for USD.

The report was published as International Monetary Fund is on the verge of conducting another evaluation of the Agency’s Special Drawing Rights basket. This review is conducted twice every 10 years. It is made up of the USD, EUR, GBP, EUR, and JPY.

The Chinese Government has been lobbying for the inclusion of its currency in this group.

According to Standard Chartered Bank, this can trigger a high of $1 trillion worth of inflows into the Yuan. Last August 11, the People’s Bank of China devalued its local currency’s reference rate (1.9 percent) and opted for a market-oriented fixing which spurred a 2.6 percent slip of the currency last August.

The possibility for the Yuan to get included is very possible, according to an economist of the DBS Group Holdings based in Hong Kong.

The US dollar, Euro and UK pound sterling are the three leading currencies with share of payment volumes recorded at 45, 27 and 8.5 percent respectively. The Yuan is the most active currency for payments to China and Hong Kong in the whole of Asia. Singapore is the leading clearing facility next to Hong Kong.

The IMF staff mentioned in one of its reports the Yuan follows other currencies in terms of metrics it tracks to determine the SDR basket.

In 2014, the Chinese Yuan was in seventh place in share of official FOREX reserves. It was behind the top SDR members, Australian and Canadian currencies.

Posted in FOREX News

USD Gains against other Currencies

FOREXConfidence on international economic growth propelled risk appetite and pushed the USD versus the Swiss franc and euro. However, the Japanese yen was up against the US dollar following the decision of Bank of Japan not to modify its monetary policy.

Analysts believe the rate hike of the US central bank will only take place in 2016. On the other hand the central banks of Japan and Europe have focused more on stimulus.

This scenario assures traders supportive policies of central banks will not upset global development. However, the continuing slowdown in China remains a main concern for investors worldwide.

The common currency dropped 0.22 percent versus the US dollar ($1.12475). The dollar moved past CHF at 0.97245 franc. The USD index, which gauges the US currency against six major currencies, climbed up 0.05 percent at around 95.495.

Meanwhile, the USD decreased a little against the JPY after the Bank of Japan left monetary policy stable notwithstanding speculation the central bank will resort to easing. The US dollar was last behind 0.24 percent versus the Japanese yen at 119.950.

Commodity currencies like the AUD and NZD maintained their recent momentum. The Aussie dollar touched $0.7235 which was the highest in over two weeks. On the other hand, the New Zealand currency reached the highest in more than six weeks ($0.6647).

The benchmark Standard &Poor 500 stock index increased 0.51 percent.

The USD declined against the CAD in spite of weak data from Canada. The pair reached 1.2987 during early trading in US markets. This was the lowest going back to August 1. It eventually consolidated at 1.3002 or 0.24 percent.

Posted in FOREX News

China’s FOREX Reserves Decline for 4th Straight Month

chinese FOREXChinese FOREX reserves decreased to $3.51 trillion at end of September, according to the People’s Bank of China.

The decline of $43.26 billion was the fourth straight although it was not really sharp compared to the previous month. The reserves went down by a high of $93.9 billion last August.

One reason for the decline is the US dollar’s strength and capital losses. FOREX reserves of China are denominated in USD and affected by the currency’s movements. An analyst from Asia said a total of 40 percent of non-dollar reserves of Chinese currency reserves gave up 25 percent in value.

Capital outflow increased during the second and third quarters due to growth issues and instability of the financial markets. China lost some $180 billion during the 2nd quarter and $272

The country’s gold reserves plummeted from $61.795 billion towards the end of August to $61.189 billion before September ended based on research.

The country’s FX reserves plunged by $42.5 billion last July.

From July to September, currency reserves declined by $179.66 billion which is more than the $40-billion decrease during the previous quarter. This marked a fifth straight quarterly fall.

FOREX reserves were propped up by exports and soared for over 10 years before starting to decline during the third quarter of last year.

At the moment, China is trying to cope with real property downturn, industrial over-capacity, lethargic demand, and stressed exports. All these pulled growth down to seven percent from January until June of 2015.

Posted in FOREX News

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