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Forex outlook:
The dollar tumbled to a four-month low against the yen while the New Zealand dollar fell sharply versus the Japanese currency on Monday as worries about a credit crunch prompted an unwinding of risky carry trades. The dollar is trading around the levels of 1.3825 against the Euro, around the levels of 117.70 against the Yen and around the levels of 2.0425 against the sterling.
The dollar fell to 117.25 yen on electronic trading platform EBS, its lowest level since late March, due partly to stop-loss position unwinding by Japanese retail investors. The dollar extended its losses following a fall in U.S. share prices on Friday after Bear Stearns said credit markets were in their worst shape in two decades. "Due to the credit-related issues there are still some moves toward risk reduction," said Tomoko Fujii, head of economics and strategy for Bank of America in Tokyo. "There is probably some sporadic unwinding of carry trades," Fuji said. The dollar pared some of its losses to stand at 117.60 yen, down about 0.35 percent from late U.S. trading on Friday. The high-yielding New Zealand dollar fell about 0.60 percent to 89.18 yen
U.S. stocks fell sharply on Friday, with the Standard & Poor's 500 Index and the NASDAQ Composite Index both losing more than 2.5 percent. Data showing the slowest rate of U.S. job growth since February added to the dollar's woes on Friday. The dollar extended its losses against the Swiss franc, falling as low as 1.1817 Swiss francs, the lowest since April 2005, according to Reuters data.
The Euro rose around 0.30 percent to $1.3816. It rose as high as $1.3840 on EBS earlier this session, nearing a record high of $1.3853 hit in late July.
Further falls in global equity markets could cause more risk aversion among investors and trigger more unwinding of yen carry trades, which involve selling the low-yielding yen to buy higher-yielding currencies and assets, traders said. Traders said the yen's rise on Monday was partly caused by stop-loss position unwinding by Japanese retail investors, who had placed bets against the low-yielding yen using leveraged margin trading.
Today we’re expecting for the publication of the Industrial output in UK at 8:30(GMT), while the forecast is decline from 0.6% to 0.1% ,higher number than the forecast might push the sterling higher against the dollar.
Gold: US. Gold little changed near a one-week high, supported by investors demand for the precious metal as an alternative asset after the dollar weakened on signs the U.S. economy might slow. Silver rose. Gold usually moves in the opposite direction to the dollar, which fell to a four-month low against the Japanese yen and also traded near a record low against the Euro today. Speculation that a slowing U.S. economy may keep the Federal Reserve from raising interest rates also weakened the dollar and boosted the appeal of the precious metal as alternative investment. ``Given the subprime mortgage crisis in the U.S. and weaker- than-forecast economic data, the dollar may be on track to decline further,'' Wang Xinyou, senior gold analyst at Agricultural Bank of China in Beijing. ``The situation is bullish for gold.'' Gold future contract is trading around the levels of 678$ per once.
Crude Oil: Crude oil fell in New York, heading for its biggest two-day decline since July 24, after OPEC increased output and on concern losses in the U.S. mortgage market will slow economic growth. The 10 members of OPEC with production quotas, all except Angola and Iraq, increased shipments by 85,000 barrels to 26.595 million barrels a day. The 10 countries, in an effort to bolster prices, pledged to trim 1.7 million barrels a day in two rounds of cuts, one that started Nov. 1 and another that took effect Feb. 1. The 10 members pumped 27.5 million barrels a day in October. Crude Oil future contract is trading around the levels of 74.65$ per barrel.
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