Dollar On a High, Euro on a Low: Chinese Shares Survive The Fall
Dollar On a High, Euro on a Low: Chinese Shares Survive The Fall
The Euro has just hit a 9 year low while the dollar is on a high, as investors bet on quantitative easing by the European Central Bank and soft manufacturing surveys pushed down shares and oil prices reached a five and a half year low.
Euro on a Low
The Euro fell to a low at USD 1.18605 which is the weakest level since the month of March 2006. It has fallen below an import support at USD 1.20. The common currency has been last traded at USD 1.1926 which is a fall of 0.6% in recent times. ECB President Mario Draghi, in an interview with a German financial daily Handelsblatt, said that the risk of the central bank not completing its mandate of preserving price stability was higher now than half a year back. The market has read this as indicating the ECB is ready for adopting quantitative easing.
The Euro Zone Inflation data will reveal that December prices fell 0.1% which is the first decline since 2009, according to economists. ECB could ease its policy as early as January 22nd, when its first policy meeting will be held in the year. There is also a pressure on central banks for the implementation of stimulus, as per business surveys displayed in the previous week. This shows that factories are working hard and barely surviving to maintain growth across not only Europe, but Asia as well. The pace of manufacturing has also slowed more than expected in the US.
Following this, Japan’s Nikkei lowered by 0.2% on the first trading day of the year. Chinese shares maintained their bullish tone since the previous year based on opportunity for more stimulus as property shares moved up based on reports which appeared in local media. Mortgage restrictions have also been loosened in recent times.
Easy Come. Easy Go.
Oil prices declined more than 50 percent from peaks during the month ofJune in the past year to hit a 5 and a half year low as global growth as created concerns regarding a supply glut.Brent crude futures fell by as much as USD 55.36 per barrel and they are the lowest since May 2009 before edging back to USD 55.41.
Commodity currencies such as the Canadian dollar and the Australian dollar dropped as a result of this.
Dollar is King
The US dollar surged against the sterling and the Swiss franc, in an extension of a recent bill run as markets bet on a healthy US economy leading to Federal Reserve increasing rates during the middle of the year.The US dollar has hit its highest level since March 2006 against an entire basket of currencies, leading on from the rally last year, as Euro fell on speculation about imminent monetary easing methods.
The dollar index measures the greenback against other currencies, and it was trading around 90.94 in recent times which is a 9 year high. The dollar has also hit a 4 and a half year high against the Euro. The dollar also reached a high of 7 and a half years of 120.59 against the Japanese Yen as well. Chinese economy is seen as soft by analysts who have also emphasised the weakness of oil prices and the impact on range of currencies are some of the other reasons apart from the weakness of the Euro which are causing the dollar to be on a high this year. In fact, there is even a “king dollar thesis” floating around. If the Euro-Dollar tango continues to the detriment of the former, fireworks could well be under way for Asian stocks, some analysts feel.
