Chilean Peso Drops as Risk Aversion Grows | ForexGen Signals

The Chilean currency suffered a large daily drawdown today as the declining stock markets around the world pressed on the investors to sell their high-yielding assets including emerging economies’ currencies.

The stock markets were declining today in U.S. and Europe as the central banks signaled a possible rate increase that would probably hurt the global economic development. While the major financial companies are still suffering from the subprime lending crisis, the inflation fears may push both Fed and ECB towards the higher interest rates.

Banco de Chile rose its interest rate yesterday from 6.25 percent to 6.75 percent, widening the gap between the U.S. rate to 4.75 percent and between the Japanese rate to 6.25 percent. That step will attract even more carry trade related activity to this South American currency.

USD/CPL rate rose today on Forex from 486.68 to 490.97 as of 20:51 GMT — that’s almost 1.3 percent daily growth. The unexpected interest rate growth made this pair to drop by almost 0.9 percent yesterday.

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Dollar Recovers against Yen after Friday | Forexgen Charts

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The U.S. dollar recovered against the Japanese yen today after the dollar lost significantly against yen on Friday and this week trading opened with a wide gap against the greenback on Forex.

USD/JPY had its biggest drop last Friday since March 19 this year. As the Forex market opened today the currency pair experienced a very wide gap of almost 50 pips (it closed at 104.92 on Friday and opened at 104.44 today).

Today dollar rose against yen as the investors decided to return to the carry trade difference between the high-yielding European currencies and the low yielding yen. Dollar got lifted in the wave as the long yen positions were closing down massively, while the dollar stood only little down against euro and pound.

USD/JPY rose today from 104.44 to 105.45 as of 8:36 GMT with the daily high being near that level too. The pair is till below its Friday open level which was at 105.94.

Kiwi Slumps on Interest Rate Comments | ForexGen Signals

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The New Zealand dollar went for a third day of losses today on the Forex market, making this week a biggest drop since mid May, as the Reserve Bank of New Zealand Governor Alan Bollard said that he may cut interest rates this year.

Bollard kept rate unchanged today at the record high 8.25 percent level. It’s kept unchanged since July last year. He also said that the economy slowed down in the first quarter of 2008 and the housing market slumped to 16-year low in April:

Our forecast is consistent with the possibility of a rate cut in the third quarter. We may see markets decide on a softer New Zealand dollar… That’s not a terribly big slump. If we were to see it coming off a lot quicker, that’s the sort of thing that would hurt inflation.

Market analysts believe that the New Zealand interest rate is too high considering the global financial turmoil and that it should be lowered to prevent the hard landing of the country’s economy.

NZD/USD decreased today from 0.7701 to 0.7664 as of 7:27 GMT with a daily low at 0.7647 after dropping more than 100 pips yesterday. NZD/JPY had an insignificant drop today after a major loss yesterday — it went down from 81.04 to 80.99 with a daily minimum at 80.67. AUD/NZD soared to the highest value since December 2001 — it grew up from 1.2413 to 1.2458 today with a daily high at 1.2485.

Australian Dollar Gains on Higher GDP | ForexGen Map

The Australian dollar benefited today from the better than expected first quarter GDP growth as the Reserve Bank of Australia may start considering interest rate hikes again.

The gross domestic product grew 0.6 percent in the first quarter of 2008 in Australia, following fourth quarter 0.7 percent increase and surpassing the median experts’ estimate value of 0.3 percent gain. In the year-to-year comparison GDP grew 3.6 percent in Q1.

Among the reason for a continued growth of the Australian economy, the market analysts outline the increased personal and government spending, as well as increase in the building sector. RBA Governor Glenn Stevens signaled yesterday that the interest rate may be raised soon if the economy growth rate doesn’t slow.

AUD/USD had its biggest gain since May 16 — it went up from 0.9511 to 0.9580 as of 9:07 GMT with a daily maximum at 0.9598. AUD/JPY also rose today — it went up from 99.98 to 100.43 with a daily high at 100.67.

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ZAR Heads for Biggest Weekly Drop | ForexGen Announcements

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The South African rand headed for the biggest weekly loss against the U.S. dollar in the last three months as the traders were concerned that the high interest rates will prevent country’s economy to rise at a fast pace.

After the central bank said that the inflation will probably keep above the bank’s target 3-6 percent rate for at least until 2010, the rand reached its lowest value against the dollar since April 17 . The South African Reserve Bank is expected to increase the official repurchase rate from 11.50 percent to 12.50 percent on its next meeting on June 12.

Major investors believe that, while the rate hikes are probably the only right treatment for the accelerating inflation, the tight monetary conditions may significantly hurt the Africa’s biggest economy growth.

And while the higher interest rate can be a positive factor for the South African currency, the global unwillingness to hold the carry trade positions paired with the instability of the national economy can turn higher rates against the rand as it probably already happens now.

USD/ZAR rate rose this week on the Forex market from 7.6005 to 7.8223 as of 13:13 GMT today with a daily maximum at 7.8821- more 2.8 percent gain, making it a highest weekly growth for this currency pair since the week starting February 3 this year.