Investors have moderated speculations on a more subdued euro and yen. Projections that the shared currency will decline versus the US dollar have subsided while wagers against the Japanese yen also dropped based on reports made by the Commodity Futures Trading Commission.
Reduction in said positions happened even as their central banks maintain bond-buying programs that normally weaken currencies.
These two currencies firmed up against their major peers at the start of this quarter while the Yuan’s devaluation started a collapse in emerging markets.
However, analysts from the Goldman Sachs Group said both the yen and euro will drop as the US Fed is all set to hike rates this December.
Goldman Sachs also expects the Bank of Japan to spread out its stimulus program during its October 30 meet. The prediction is the euro may decline by US10 cents while JPY will decline to 130 per USD in 2016.
Some market analysts raised year-end projections for the common currency by four cents (US) to $1.08 and bolstered their forecasts for the Japanese currency to 123 per USD from the 126 last July.
The EUR was listed at $1.1235 in London which is up from the 12-year trough of $1.0458 last March 16. The JPY strengthened to 120.03 per USD since going down to 125.86 last June.
The CFTC revealed the EUR will plunge versus the USD dropped to 87,660 last week from 180,730 last January. Investors scaled down net-short positions for the JPY from 116,286 to 22,052 last week.
Regional economists see the decrease of Japan’s yen beyond 125 per dollar as the BOJ plans to add stimulus during its policy meeting this month.
Observers in the international FOREX market believe the EUR and GBP exchange rate will drop regardless of the strength in the euro rate structure.
The UK pound sterling was quite passive from August to September which allowed EUR and GBP to trade within the range of 0.72 to 0.74.
This has not improved until this week as the euro forced the currency pair above the ceiling of 0.74 and probably to a higher range.
The pound sterling struggled because of expectations that interest rates hike may be deferred by the Bank of England. There will be an upward pressure in case the BOE decides to be aggressive in terms of rate increases.
However, central bank officials believe the first rate hike will come during the first quarter of 2016.
Producer prices in the euro zone tightened beyond expectations which promoted speculations the European Central Bank will intervene to accelerate price pressure. The shared currency gained against other major currencies. This appreciation may be associated with the negative correlation between the EUR and USD which caused the euro to rise as a result of the US dollar’s downward trend.
Meanwhile, the FOREX reserves of Azerbaijan, a former Soviet republic in Eastern Europe, decreased from $7.315 to $7.044 billion in September. This is based on a report of its central bank. The bank’s reserves dropped from $13.758 billion (end of 2014) because of the central bank’s intervention.
The Norwegian Krone plummeted over 20 percent against the United States dollar during the past year. It is one of the worst performers among the 10 principal currencies tracked by the Correlation Weighted Index of Bloomberg in that particular period. The currency also showed a huge increase in volatility versus the euro during the last three months.
The government has become apprehensive of economic fallout after the currency is now hard to trade. Norway is one of the richest nations in the world.
According to Prime Minister Erna Solberg, the quick decline of Norway’s krone provides short-term reprieve to the largest oil producer in Western Europe. For the long-term, loss of liquidity and additional instability create risks for businesses trying to plan for more investments.
Solberg said during a Nordic Council conference outside Copenhagen this development does not bode well for a nation with unstable currency since it is vital for long-term planning when it comes to investments.
This statement of Solberg seems to contradict the message of Central Bank Governor Oeystein Olsen who welcomed the decline of the kroner since it helped exporters. He delivered an unexpected rate cut last September 24 that drove the currency down over three percent versus the euro.
Olsen noted the kroner weakened along with crude oil price but it does not constitute volatility.
Nevertheless, some economic analysts reiterated concerns of PM Solberg. Strategists of a number of Scandinavia’s largest banks maintain the currency is being treated with further concern. One bank said investors avoid the currency due to its unsteadiness.
Solberg put emphasis on the government’s pledge to prevent Norway’s over-dependence on oil. Nearly one quarter of yield and one out of nine jobs rely on the country’s petroleum industry.
The Singaporean dollar declined drastically during the past few months against primary currencies like the USD and EUR. Nonetheless, many local firms exposed to these markets said increases in their operating expenditures remain manageable.
These companies were able to implement strategies for controlling currency fluctuations like FOREX hedging along with diversifying exposures to various markets. These lessen effects of a weaker local currency.
The SGD weakened roughly eight percent against the US dollar and almost 10 percent against the euro since April. This was the time the local currency reached its highest peak in 2015 against said currencies. Last October 1, the Singapore dollar changed hands at S$1.4269 to USD and S$1.5915 to EUR.
According to the spokesperson of one corporation, there was a stable mix of revenues in Singapore dollars from domestic sales which helped allay the FOREX impact.
This company placed a currency buffer on overseas deals. It imports products from Greece in euro denomination and exports these goods to China in USD.
Many local consumers have also decided to reduce their online purchases during the last two months. During that period, local merchants were able to generate a 40 percent increase in terms of sales.
Many economists stated the currency’s rise and fall on the broader economy has been subdued up to now. One economist noted that the pathetic Singapore dollar does not automatically make merchants’ exports cheaper. The nation lacks the natural resources. Henceforth, these should be imported to produce commodities for export so that costs will continue to be higher compared to countries in North Asia that produce similar goods.
The USD climbed against EUR as international stock markets scaled up and private sector jobs statistics boosted bets that the US Fed will increase interest rates before the end of 2015. On the other hand, the euro declined on reports that inflation in the euro zone inflation has become negative.
Private employers in the US added 200,000 jobs last month beating projections and pointing out employment growth will prod the central bank to increase cash rates this year, based on the ADP’s National Employment Report.
The US dollar index went up 0.45 percent for a 0.7 percent gain during the past three months.
USD was also up 0.30 percent versus the Japanese yen to more than 120 yen. It was also steadier versus the Swiss franc and flat compared to the UK pound sterling.
The common currency declined against the YS dollar 0.6 percent to $1.1180. It was behind the UK currency by 0.6 percent following the release of inflation reports from the Euro zone.
Prices in Europe dropped 0.1 percent in September after increasing 0.1 percent below projections and under the target of European Central Bank which is below two percent.
Market traders believe a continuous decline below zero reinforces apprehensions of policymakers regarding the euro’s influence on financial scenarios. Meanwhile, the ECB is looking at inflation expectations and decreases in the headline rate
The euro gained against its US counterpart during the quarter since investors engaged in euro-financed trades on riskier assets and up-and-coming currencies.