What Are Dollar to Euro Anticipated Rates in 2012

The downgrade of America's AA rating, the deepening debt crisis in Europe and a global deterioration on the economic and financial front, has led major economic and financial experts to look again in their outlook on dollar to euro anticipated rates in 2012. Most of them strongly believe that the governing monetary policy in the Euro Zone which tightened in April will continue in the light till late February, 2012, at least.

This is important whether you're a forex trader or planning a vacation to Europe. Without doubt, dollar is the reserve currency of the world. It took just a financial emergency to show just how significant a reserve currency is. The economic slowdown saw investors panicking and taking their money out of the risky investments and putting them in less risky commodities.

Investors were seen buying the euro. Europe had superior interest rates and a dependable central banking system. The European Central Bank, which is the equivalent of the Federal Reserve, is reluctant to turn to the printing press and inflate the euro. But when a law is no longer goes well with the policy of a government, it can make amendments. This was seen in a very recent example 750-billion euro bail out for Greece, where ECB bought Greek government bonds and printed Euros to foot the bill. However, this will lead to an unavoidable inflation in Euro. The reality is that the bailout has been an utter failure.

One should not make any mistakes here. The uncertainties ware bound to continue and Europe will have to go through more in the coming years. 10% of GDP budget cuts will certify a long and painful recession in Ireland, Portugal, Greece and Italy. This alone could leave negative impact on Euro. Driven by continue concerns in the Eurozone, a soft patch has developed for the euro in recent months.

So, what are dollar to euro anticipated rates in 2012? This is important for any investor and where he should put his money. If we look behind, we will see the Euro peaking in 2008 and then plummeting down massively. But market experts believe it won't be long to see the Euro reaching equivalence with the dollar. With tax raises and budget cuts, it is almost a certainty that the E interest rates would be low in Euro Zone. That clearly means that the U.S. interest rates will catch up with European rates, sooner or later.

However, the inventor would still favor dollar over the euro, as they would get higher returns on their currency deposits. Thanks to the fallout from Europe's debt crisis, your dollar can still be stretched along way, if you go for a vacation there. Short the euro to reap big rewards over the next years if you are in investor.

RBS have warned of further weakening in euro exchange rate in 2012. The euro will reach equality with the dollar, sooner than we think. We are sure you have a fairly good idea now of what are dollar to euro anticipated rates in 2012.

You can see more information about dollar to euro anticipated rates in our website.

View the original article here

Aussie Dollar in a Copper Cauldron!

by Jack Crooks

I keep thinking that any day now the Australian dollar will take a dirt nap. It took one back in mid-2008, falling a stunning 39 percent in just three months in the midst of the credit crunch. This shows just how vulnerable the Aussie can be to a growth accident that slams the world economy; it is the premiere risk currency among the major dollar currency pairs.
Global growth is fading fast again, and copper seems to be highlighting that story. It could be lights out for the Aussie again if that’s the case.
As you can see in the chart below, the copper futures weekly uptrend line is broken, and the primary trend is down. The yellow rectangular box shows what happened in the midst of the great credit crunch of 2008.

And as you may know, copper is considered a key industrial metal; its price movement is often used as an indicator of the direction of growth in the global economy.
If you are a regular reader of Money and Markets, you likely know that China is the world’s largest consumer of copper. But the drop in prices has not come as a welcome development. This is because …
Copper Has Taken on an
Important Role in Financing
An increasing number of Chinese firms have been stockpiling the metal and using it as collateral — because the government’s measures to curb inflation have limited the firms’ access to credit. Such financing links the price of copper to other key elements of the Chinese economy, including the growing speculative real estate bubble.
China’s tightening monetary policy has made it more difficult to access credit through official channels. As a result, Chinese small- and medium-size enterprises have increasingly turned to copper for use as collateral in loans, which are then funneled into other sectors of the economy.
The falling price of copper means that the collateral initially put up for the loans in yuan is no longer worth what it once was, decreasing the likelihood that the borrower will be able to pay back the loan.
If firms default on debts, then others connected in the chain will default — and determining where loans have been invested is nearly impossible.
Banks and state-owned enterprises (SOEs) are also potentially vulnerable. A high number of SOEs have also used copper as collateral. These firms are often involved in the real estate sector — even if their primary function is not always directly linked to it — and are therefore exposed to the country’s growing real estate bubble.
The government would bail out the more politically favored SOEs if necessary. But that would leave fewer resources to be allocated to the private sector, which is crucially important to China’s growth.
It is all about feedback loops. And …
This One Could Turn Quite Vicious
for China and In Turn the Aussie Dollar!
The Australian economy is highly dependent on China for its own growth. For a while now, I’ve been saying that Australia has effectively become a satellite country of China. Take a look at this chart showing China’s imports from Australia thru September.

Lower copper prices could put a real damper on Australia’s growth. Another major hit is already in play: Falling consumer demand from the euro zone and the U.S.
And if the bubble were to finally pop in Chinese real estate, it would be much uglier indeed.
So we have the potential for real demand in copper and other commodities to decline sharply. Toss in the added thumping from the internal Chinese speculation, which would likely push the metal back toward its credit crunch low, and you get another 50 percent decline in the red metal.
And guess which currency has been tightly correlated to the price of copper over the last few years? If you said the Aussie dollar, you were right on!
There are two key takeaways from the following chart of the Aussie/U.S. dollar vs. copper:
1) There is a very large divergence between the two price series; and
2) In the past the series have been highly correlated.

I suspect we will see a big move one way or the other. It could be copper soars. But for now, I’m betting the Aussie tanks.
Stay tuned.
Jack
Related posts:
Stronger yuan, higher labor costs, euro zone threaten China’s advantageCanadian Dollar – The Ultra-Safe Secret Natural Gas PlayTaps for the DollarDollar Sharply Lower on China Reserve Diversification TalkPlaying the China Blame Game – The Currencies to Trade if the U.S. Launches Another Trade War
.
View the original article here

NO QE3: What are the Implications for the Dollar?

The verdict is nearly in; there will be no QE3. The second round of quantitative easing (“QE2”) will expire at the end of this month, and while it will not be unwound for quite some time, the Fed has indicated that it will not be followed by yet another round. The question on the minds of forex traders, of course, is what does this mean for the Dollar?

In his most recent press conference, Ben Bernanke, himself, indicated that QE3 was unlikely. According to a survey conducted by Bloomberg News, the majority of FX analysts (65%) believe him. Simply, the circumstances don’t support further easing. To be sure, the unemployment rate remains high, and the economy is teetering on the verge of double-dip recession. However, the last two rounds did little to address either of these problems, and companies have hoarded cash rather than investing in new plant and workers.
Interest rates are still hovering around record lows, and there isn’t anything to be gained from trying to lower them further. Besides, given that inflation is now above 3% – due to an explosion in good and energy prices – QE3 would simply be too risky. Economist Ken Goldstein summarized the situation as follows: “We will come to the end of QE2 and largely we mark about how little happened when it ended and that’s also an argument about why there may not be persuasive argument to do a QE3.”
On the other hand, there are some analysts who think that QE3 is inevitable (29%). PIMCO’s Bill Gross, manager of the world’s biggest bond fund, recently indicated that, “Next Jackson Hole in August will likely hint at QE3/interest rate caps.” (Personally, I think that he’s probably just bitter that his forecast of a decline in Treasury Bond prices hasn’t materialized). One columnist wrote that the Fed’s arm will be twisted by the ongoing collapse of the housing market, while others have argued that the recent decline in the S&P 500 will spur the Fed into action. Most of us, however, believe that the Fed will adopt a wait-and-see approach before ultimately conceding that more easing is necessary.

For now at least, then, the prevailing assumption is that there will not be a QE3. As for how forex markets have digested this news, they have taken it in stride. The Dollar is now holding its value, and as I wrote in a previous post, it may even have bottomed out. Of course, it doesn’t hurt that the Euro is being punished by another flare-up in the sovereign debt crisis and investors are getting nervous about bubbles in emerging market currencies, all of which provide support for the dollar.
The fact that QE2 will soon end without having triggered financial apocalypse or hyperinflation – as some cassandras initially predicted – is something that is worth nothing. Of course, the proceeds of QE1 and QE2 will be recycled indefinitely into the markets, and forex investors can’t completely put quantitative easing behind them. Still, that there won’t be any more additional cash injected into commodities markets and emerging economy asset markets means that one of the main sources of downward pressure on the dollar has been eliminated.
Ironically, it is possible that the unveiling of QE3 could actually cause the dollar to rally. The reason is that there is still a tremendous amount of uncertainty in the markets, which provides the dollar with some safe haven demand. If the Fed were to concede that all is not well on the economic front and respond by more money printing, it could drive some safe haven flows into the US, even to the extent that it would overwhelm outflows driven by concerns over inflation.
Personally, I think the dollar will continue to hold its value, and perhaps even appreciate slightly in the near-term, as forex markets dither over the way forward.
http://www.forexblog.org/2011/06/has-the-us-dollar-hit-bottom.html

View the original article here