Euro Holds On To Gains
The Euro maintained its one month high against the Dollar and rose against the Japanese Yen on interbank forex markets. Interbank forex brokers attributed the rise to positive US and German economic data. An unexpected rise in US housing starts and a stock market rally sent interbank forex brokers and investors in search of higher yielding currencies.
US Housing Starts Up
US housing starts were up 22.2% in February from the previous month. Kathy Lien of GFT Forex stated, “The uptick in the housing market and the tepid inflation pressures are welcome improvements.” Interbank markets took note of the rise of the Euro to $1.30 on Monday, the highest in months.
Financial Markets Stabilizing
Many interbank FX brokers believe that markets are beginning to stabilize with a resulting increase in investor risk sentiment. This has put pressure on the Dollar on interbank forex markets since the dollar performs well in a risk averse climate. Interbank forex brokers are waiting for the results of a Federal Open Market Committee meeting and a Ban of Japan policy meeting.
Bank of Japan to Increase Bank’s Capital
The Bank of Japan has offered up to 1 trillion Yen to banks to increase capital and may decide to purchase more government bonds to inject more funds into markets. Central banks around the globe are considering unconventional measures to bolster their economies. Many are expected to turn to quantitative easing to keep credit moving. Some interbank forex brokers are skeptical that the Euro’s rally will continue. The European Central Bank is seen as behind the curve in addressing the recession. Masafumi Yamamoto of the Royal Bank of Scotland stated, “The European Central Bank is behind the curve and it must do more in coming months. Euro/dollar and euro/yen may recover more but it’s not the start of an uptrend.”
The rise of risk sentiment is good news for interbank forex markets. There are signs that financial markets are beginning to stabilize and one can only hope for this trend to continue.
