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Week ended 5th August, 2011 – Currencies this week.

This week, first it was Swiss National Bank, which announced a rate cut to control the valuation of their currency. Swiss FRANC surged nearly 10% against EURO in last 2 months and 23% against the US$ in last 6 months, as debt crisis worsened in Europe. US debt problem may be one of the cause of this week’s fall in stock market but Swiss FRANC and YEN must have also contributed on that fall.


S.African RAND
Brazilian REAL
Mexican PESO

Japan follows the Swiss and they intervened to control surging YEN, which gained 12% against US$ in last one year. Bank of Japan said that it would create more liquidity in the financial market by purchasing more government bonds and other securities. Now this changes in FRANC and YEN are really needed because it was hurting their export, so this type of actions were expected. But I have doubt that this will have an effect for long-term.
Most of the Asian currencies declined this week, mainly due to fall in regional stock indexes. AUD dropped as nation Central bank lowered growth forecast and unchanged interest rate. There was some news of selling dollar by Turkey’s Central bank.

Coming week

Euro is still moving around that range of 1.40-1.44, as I said that it is close to break-up but when it will do that for sure I don’t know.
For USD that lower lows and lower highs pattern is seems to be not working, though there is still a chance as it did not able to break 76 level but I am not sure. To prove the pattern it needs to go down below 72 level.
AUD made a huge jump, though it couldn’t able to close below it’s support of 1.04 but the fall was big. Now if it continues with this fall then next support is at 1.03 and the better one is at 1.02, but I think it will rise in coming days and may try to break 1.06 level.
In spite of rate hike, Swiss FRANC did not change it’s path, though it seems to be taking some support at 0.765. Now from here if it changes it’s path then it may face resistance at 0.80. But things are not same with Japanese YEN as it has shown reaction after their government’s action. It is getting resistance at 79 and if things goes this way then it may break it and go for levels above 80.
After getting a good support at 1.53 level, Brazilian REAL is getting good resistance at 1.60 level. Brazilian government can be in a better condition if it able to break 1.64 for now.

Beside Turkish news, south Korean Central bank purchased Gold for the first time in 13 years, which shows  that it is diversifying it’s Foreign Exchange Reserve. This is definitely not a good sign for major currencies. In coming days if many countries took this same path like Korean then it will be very easy for investors to understand the way for future.

NOTE :  Please see the disclaimer below this blog .


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