US Dollar Weakens as Risk Appetite Makes a Cautious Appearance

US dollar is weakening today as risk appetite makes a cautious appearance in the markets. Yesterday, greenback was higher, and gold prices reached a low not seen for 10 weeks. Today equities are still struggling, but higher gold is helping the euro against the US dollar, and some Forex traders are looking for risk.

Some of the fears surrounding economic growth in the eurozone and in China have eased somewhat, and that has provided some of the high beta currencies a little boost today. Euro is benefitting as fears about the eurozone ease somewhat, and as gold prices rise.

However, some think that the US dollar will return to strength again soon. The troubles in the eurozone still have not been completely resolved, and the outlook in the United States continues to strengthen. Expectations for better economic performance are likely to help support the greenback — especially when the performance of the US economy is compared to the eurozone economy.

For now, though, a small amount of risk appetite is present in the Forex market. It may not last long, though, especially if other riskier assets, like equities, continue to struggle.

At 13:27 GMT EUR/USD is up to 1.3242 from the open at 1.3198. GBP/USD is up to 1.5840 from the open at 1.5814. USD/JPY is lower at 82.3925, down from the open at 82.5780.

If you have any questions, comments or opinions regarding the US Dollar, feel free to post them using the commentary form below.

UK Pound Higher Against Greenback, Aussie

UK pound is finding some strength today against the US dollar and the Australian dollar. Sterling is rising against the greenback as risk appetite makes an appearance, and gaining against the Aussie as the news about China continues to weigh on the Down Under currency.

UK pound has been struggling recently, thanks in large part to an unpopular budget announced by George Osborne. Concerns about the fact that the budget cuts spending, as well as taxes, are weighing as it appears that there won’t be much to help stimulate the economy.

Today, though, sterling is seeing some success. While the British currency is losing ground to the euro, it is gaining against the US dollar. Greenback is under pressure today as gold prices bounce back, and as a measure of risk appetite returns. This general risk appetite is helping the UK pound.

Against the Aussie, the pound is getting help from the fact that China is showing signs of slowing growth. Australia is a major trading partner with China, and with Chinese demand in doubt, the Australian dollar is pulling back, leaving room for the sterling to gain.

At 14:16 GMT GBP/USD is at 1.5837, up from the open at 1.5818. EUR/GBP is up to 0.8352, up from the open at 0.8342. GBP/AUD is gaining, moving up to 1.5258 from the open at 1.5209.

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Canadian Dollar Rises as Core Inflation Quickens

The Canadian dollar erased its losses against its US counterpart as core inflation data was better than predicted and after prices for crude oil jumped. The currency was flat against the Japanese yen and fell versus the euro.

Annual consumer price inflation was 2.6 percent in February, while core inflation was 2.5 percent. Inflation was below forecast, while core inflation was above the predicted value. On month-over-month basis, the Consumer Price Index rose 0.4 percent last month, exactly as forecasters predicted, and core CPI also advanced 0.4 percent, slightly above forecasts.

Crude oil prices also provided a support to the loonie. Futures for delivery of crude oil in May gained $1.53 to $106.88 per barrel. Crude is the main export of Canada.

USD/CAD traded at 0.9976 as of 20:53 GMT today after earlier it advanced from 0.9993 to 1.0033 — the highest level since February 27. CAD/JPY was down from 82.61 to 82.49 after sliding to 81.83, the lowest since March 8. Meanwhile, EUR/CAD rose from 1.3184 to 1.3241 and the daily maximum of 1.3287 was the highest since February 29.

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Australian Dollar Gains as Fed Considers Dropping of Monetary Easing

The Australian dollar rose, erasing its previous losses, as stocks gained and prices for raw materials increased as market sentiment gradually turns to risk appetite and on the speculation that the Federal Reserve may reduce stimulus for the US economy.

James Bullard, President of the Federal Reserve Bank of St. Louis, thought that it may be time to drop the monetary easing:

With numerous monetary policy actions still on the table, and others still affecting the economy with a lag, it may be especially difficult to remove policy accommodation at the appropriate pace and at the appropriate time. One may want to approach such a situation with caution.

Bullard considered the US economy is recovering fast enough to exist without excessive stimulus. Fed Chairman Ben Bernanke wasn’t so optimistic about the recovery of the US economy and expressed his view:

Consumer spending is not recovered, it’s still quite weak relative to where it was before the crisis. In terms of debt and consumption and so on we’re still way low relative to the patterns before.

Crude oil gained on concerns about disruption of supplies from Iran. Metals, including gold, silver, platinum, and copper also advanced. The Aussie profited from the rally of commodities and also from expansion of carry trade as speculators were buying the yen to buy assets denominated in the Australian currency.

AUD/USD rose from 1.0395 to close at 1.0465. AUD/JPY went up from 85.85 to 86.16, following the drop to 85.17. EUR/AUD closed lower from 1.2689 to 1.2673, while earlier it advanced as high s 1.2754 — the highest rate since December 30.

If you have any questions, comments or opinions regarding the Australian Dollar, feel free to post them using the commentary form below.