China's State Administration Of Foreign Exchange SAFE. Connecting decision makers to a dynamic network of information, people and eafe, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world. We examine the case of NXPI. How should I prioritize inherited money? ETFs: Diversification the Easy Way. Which approach is right for the forex trader?
As it turns out, the forex markets are currently treating the Loonie and the Aussie as inseparable. Why is this the case? As it turns out, there are a handful of reasons. You can see from the chart above that the year-long commodities boom and sudden drop corresponded with similar movement in commodity currencies. Beyond this, both currencies are seen as attractive proxies for safd.
Even though the chaos in the eurozone has very little actual connection to the Loonie and Aussie which are fiscally sound, geographically distinct, and economically insulated from the crisisthe two currencies have recently taken their cues from fkrex developments in Greece, of all fotex. Finally, the Bank of Canada is in a very similar position to the Reserve Bank of Australia RBA. While GDP growth has indeed moderated in both countries, price inflation has not.
Further complicating the picture is the fact sade the Loonie is near a record high, and the BOC remains wary of further stoking the fires of appreciation by making it more attractive to carry traders. In the near-term, then, the prospects for further appreciation are not good. A pullback towards parity — and beyond — seems like the safe china forex forrx possibility. Since peaking at the end of April, commodity prices have fallen mightily.
As commodities prices have fallen over the last two months, so has the Australian Dollar. In addition, while demand will probably remain strong cuina the long-term, it may very well slacken over the short-term, due to declining economic growth across the industrialized world. The apparent stabilizing of the dollarthen, might let some air out of the currency down under. Safw now at least, they are responding by dumping emerging market currencies. As you can see from the chart above which shows cuina cross-section of emerging market forexmost currencies peaked in the beginning of May and have since sold-off significantly.
If not for the rally that started off the year, all emerging market currencies would fores be down for the year-to-date, and in fact many of them are anyway. There are a couple aafe factors that are driving this ebbing of sentiment. First of all, risk appetite is waning. Over the last couple months, every flareup in the eurozone debt crisis coincided with a sell-off in emerging markets. Some analysts believe that because emerging economies are generally more fiscally sound than their fundamental counterparts, that they are inherently less risky.
Cbina, while this proposition makes theoretical sense, you can be assured that a default by a member of the eurozone will trigger a mass exodus into safe havens — NOT into emerging markets. While emerging market Asia and South America is somewhat insulated from eurozone fiscal problems. On the other hand, they remain vulnerable to an safe china forex slowdown in China and to rising inflation.
Emerging market central banks have avoided making significant interest rate hikes hence, rising bond prices — for fear of inviting further capital inflow and stoking currency appreciation — and the result has been rising price inflation. You can see from the chart above that chnia darkest areas symbolizing higher inflation are all located in emerging economic regions. While high inflation is not inherently problematic, it is not difficult to conceive of a downward spiral into hyperinflation.
Again, a sudden bout of cchina instability would send investors rushing to the exits. While most analysts myself included remain bullish on emerging markets over the long-termmany are laying off in the short-term. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many cjina like monetary policy, currency inflation, and geo-political risks that may not be forseen.
Loonie and Aussie Share Downward Bond. Tide is Turning for the Aussie. First of all, the putative economic boom that is taking place in Australia is being driven entirely by high commodity safe china forex and surging production and exports. Emerging Market Currencies Brace for Correction. Enter your email address: Delivered by FeedBurner.
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