G8 Positive About Economy
The weekend meeting of the G 8 nations yielded some positive viewpoints about the global economy. Finance Ministers believe the credit crisis is easing and described their respective economies in the most positive terms since the global recession began. Despite the positive tone of the meeting many participants expressed caution. Currency exchange rates were affected and on Monday the US dollar continued its rally which started on Friday. Investors took profits on high yielding currencies such as the Australian dollar and the New Zealand dollar.
Investors See Excessive Optimism
Many investors have doubts about what they see as excessive optimism about global recovery. Asian oil prices continued their slide putting pressure on commodity linked currencies. An unnamed senior trader at a Japanese bank stated, “The market began taking profits on gains in emerging market currencies as well as higher-yielding currencies before the G8 meeting, and this is continuing as many investors still have their doubts about the recent excessive optimism over an economic recovery.”
Too Soon to Withdraw Stimulus Programs
Although the G 8 meeting participants have started to consider how to withdraw the various stimulus programs in effect they also said there must be firmer signs of recovery before the stimulus programs are withdrawn completely. Although currency exchange rates were not on the G8 agenda the meeting had an affect on global currency markets. The euro to dollar rate fell 0.5% to $1.3942 after hitting a recent high of $1.41. The recent high triggered automatic sell orders from investors putting downward pressure on the euro. The euro came under further pressure after the UK Daily Telegraph reported that a top German industrial group warned that the credit crisis is getting worse in Germany.
BRIC (Brazil, Russia, India, China) Meeting Tuesday
In the near future investors will be watching the BRIC (Brazil, Russia, India, China) meeting closely. Russian Finance Minister Alexei Kudrin said in advance of the meeting that the dollar’s status as a reserve currency is unlikely to change in the near future. The statement helped the dollar exchange rate against other major currencies. The BRIC nations are not expected to discuss an alternative reserve currency at their Tuesday meeting.
Quite a bit of economic data from many sources is expected this week and is expected to contribute to already volatile forex trading.