Usd Forex Analysis
Currency: Commodity Currencies face difficult times?
Many analysts now believe that the currencies of commodity risk become victims of their own success as the rally this year has made them increasingly dependent on continuous upward economic surprises to drive beyond major technical obstacles.
A move by China to allow the yuan to appreciate can also play these high yield currencies if triggered a wave of risk aversion.
The Canadian, Australian dollar and New Zealand have met in the international financial institutions ( forex ) Market in recent weeks. They have been spurred by solid economic fundamentals, the continued demand for China to export commodity of the three countries and the prospect of rising domestic interest rates. The rally has brought Australian and Canadian dollars, in particular, about technical levels beyond which the key can now be difficult to advance, increasing the risk of a correction.
"Ultimately the forces underlying DAC, the Aussie and kiwi will not change much and these trends will continue in the increasingly overvalued territory, "said Neil Mellor, currency strategist at Bank of New York Mellon. "Some very nervous investors could look to take profit and get very agitated," he said, adding that the recent increase in the number promote these currencies by speculators also left room for retreat.
There are three signs are struggling to move forward. The Canadian Dollar has failed remain above parity with U.S. dollar after breaking that level last week. On Friday the release of weaker than jobs data provided led to a sharp fall in the value of the currency, highlighting the vulnerability to these levels.
Also last week the Australian dollar reached five-month high of $ 0.9389 but is now struggling to break through its high USD0.9407 2009, especially after the publication of disappointing housing data Monday. A series of increases in interest rates have allowed the currency to appreciate this year, but if other central banks start to raise rates this will reduce yield currencies and reduce their commercial appeal.
Both Canada and New Zealand is expected to raise interest rates in the third quarter, which is even when market analysts feel the U.S. Fed moves on interest rates increasing.
Now any move by China to revalue the yuan – which many expect the market soon – could trigger a negative reaction reflects the commodity currencies as investors could feel the dent risk appetite and weighing on Chinese demand for raw materials. "If China allows a significant appreciation of the yuan, Australian dollar and New Zealand would probably be the biggest losers in the G-10, "said Barclays Capital said in a note to clients.
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