Fundamentals driving global markets

released in different parts of the world as central banks try to intervene in the currency markets. We have already seen the Bank of Japan intervene in the currency markets as they moved in to weaken their currency to curb any rallies against the dollar.

The aggressiveness by the Bank of Japan to sell their currency has been making headlines as this affected higher-yielding asset like the rand, Aussie dollar, Canadian dollar and New Zealand dollar to the downside.
This pushed the dollar up against all commodity currencies reversing earlier losses against the rand. The rand was pushed into the ranges of 7,80 to 7,88 against the dollar.
South Africa’s rand also remained weaker on a slowdown in credit during the month of September increasing bets that their central bank will keep rates unchanged in their next meeting to support economic growth.

The rand fell by 2,1 percent to trade at 7,8846 per dollar showing that South Africa’s economy is affected negatively by a deterioration in economy activity around the world and is negative for the rand.
This week’s headlines will definitely affect growth related currencies either to the upside or downside. Australia’s central bank lowered its benchmark interest rate for the first time since April 2009 as

inflation eases and weaker global growth threatens to slow the nation’s resource-driven economy.
The current global growth conditions have since dimmed the demand outlook especially for all resource driven nations. The cut, which sent the local currency falling, reflects a decline in the nation’s underlying inflation rate to the weakest in 14 years as Europe’s debt crisis dims prospects for the world economy.

The Australian dollar dropped to $1,0458 from $1,0530 against the US dollar after that decision. The Aussie dollar slid by 1 percent against the yen to 81,49 yen.
With the Chinese purchasing manager index falling slightly in the month of October this could further weigh on the Aussie dollar. The trade performance in the Asian region looks favourable given the recent growth performance in the Chinese economy.

China is a big fan of Australian resources and better trades have kept the Aussie dollar afloat against other growth related currencies.
The Aussie dollar has risen by 5,6 percent since August as compared to 4,5 percent in the Norwegian krone, 3,5 percent in the Canadian dollar and 3,9 percent in the rand.
In Europe the euro fell on speculation that the ECB will likely cut interest rates tomorrow due to economic pressure within the region as slowdown has since weighed on the euro. If ECB cuts rates this week.

The bias is likely to be in favour of the dollar as we are going to see dollar strength, but there could be a twist in the tale as the Federal Open Market Committee seeks to address the issue of a further monetary easing to boost the economy.
The euro dropped 0,4 percent to US$1,3806 in London trade, when it sank 2 percent, the sharpest slide since August 2010. The 17-nation euro slipped 0,5 percent to 107,82 yen. The dollar was at

78,11 yen from 78,17 when it touched 79,53, the highest since August 4.
At the moment we are seeing a dollar strength being driven by fundamentals ahead of the jobs data. Investors are wary of a dollar backlash given the economic activity in the US as they wait on the macroeconomic announcement from the US for the month of October.

On the commodity front, crude oil seems to be driven by fundamentals as demand stalled on Chinese slowdown and European leaders struggle to contain the debt crisis.
The market needs better headlines coming through from Europe as this is pushing traders to manage their portfolios cautiously in this volatile environment.

Crude oil fell by 93 cents to trade at US$92,26 per barrel. Gold declined in London trade as the demand outlook dimmed prospects of a rally in the metal as it lost its safe haven status.
The bullion fell to US$1 713,50 an ounce ahead of macroeconomic announcements from the US economy. If the outlook in the US economy is bad concerning the macro announcements we could see a gold rally. If the Federal Reserve goes ahead with its stimulus package we could see a weak dollar and a gold rally maybe test US$1 720 an ounce.