HEFFX Daily FX News

Posted by: : Shayne HeffernanPosted on: May 26, 2014 HEFFX Daily FX News

HEFFX Daily FX News

The Australian dollar was little changed at $0.9239, having formed a base just above 92 U.S. cents after a recent selloff that saw it fall from 94 cents.

Markets seemed to have come to the realization that the Reserve Bank of Australia will keep interest rates at a record low 2.5 percent for the foreseeable future.

In Asia, the Bank of Japan will release minutes of its April policy meeting followed by a speech by BOJ Deputy Governor Kikuo Iwata.

With the BOJ having repeatedly expressed confidence that its policy setting is delivering desired results, traders expect the minutes to reveal nothing new.

The euro slipped early on Monday, while the other major currencies got off to a steady start as the results of a presidential election in Ukraine and votes for the European Parliament were so far greeted calmly by investors.

Dealers expect little action on Monday with U.S. markets closed for Memorial Day, while UK markets are shut for the Spring bank holiday.

Tensions between Ukraine and Russia have escalated in recent months, with Kiev accusing Moscow of sowing deadly disorder in its mostly Russian-speaking east, where pro-Moscow separatists have declared independence and asked to join Russia.

Results will not be announced until Monday but runner-up Yulia Tymoshenko, on 13 percent, made clear she would concede, sparing the country a tense three weeks until a runoff round.

“Poroshenko’s victory in the first round of vote is positive for political stability, even though there remains a huge uncertainty and we need to keep an eye on further developments,” said Junya Tanase, chief currency strategist at JPMorgan Chase Bank in Tokyo.

The improved mood put pressure on the safe-haven yen, which fetched 101.97 yen to the dollar in early trade, near its lowest level in more than a week.

The euro faced pressures of its own, holding near a three-month low of $1.3615, not helped by a rise in votes for anti-establishment parties in the European Parliament elections, especially in France and Greece.

In France, the far right National Front scored a stunning victory, forcing French Prime Minister Manuel Valls to call the breakthrough by the anti-immigration, anti-euro party “an earthquake” for France and Europe.

Greece’s radical leftist Syriza also rode a wave of anti-austerity anger to win the country’s EU election, though it failed to deliver a knockout blow against Prime Minister Antonis Samaras’ government, the official projection showed on Sunday.

“We have to pay attention to how periphery euro bonds will react to the election results. Because their spreads have been tightening sharply over the past year, there could be some correction, in which case, the euro could face further pressure,” said JPMorgan’s Tanase.

Christine Lagarde, managing director of the International Monetary Fund, called on Sunday for closer cooperation among the world’s central banks to cope with the challenges of increasingly interlinked and complex financial systems.

Speaking at a dinner in Sintra, Portugal, to kick off the first annual ECB Forum conference, Lagarde said the potential gains from cooperation could be huge in times of distress as seen during the financial crisis.

“If policies are viewed only from a national perspective, we may end up in a world of ad hoc intervention, less rebalancing, and the potential to export financial instability,” she said in the text of her speech.

“This would be a world of possibly large welfare losses in many countries, with not just spillover effects — from advanced to emerging market economies, but also ‘spillbacks’ — feedback effects from emerging market to large advanced economies.”

The financial crisis has shown that coordinated international action helped prevent disruption spreading to economies around the globe, she said. And these upsides should not be forgotten as the crisis subsides.

The common currency last traded at $1.3629 compared with around $1.3631 late in New York on Friday. It briefly dipped to $1.3615, a low not seen since mid-February. Against the yen, it was a touch softer at 138.96.

The euro has fallen more than 2 percent on the greenback since May 5 amid mounting expectations that the European Central Bank (ECB) will ease policy next month.

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Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
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