By CountingPips.com
The U.S. dollar and Japanese yen surged higher in forex trading this week against the other major currencies while the U.S. stock markets had their worst week in 10 months. Risk aversion was the dominant theme of the week and was triggered by numerous factors including Greece’s continuing financial woes, Barack Obama’s plan for tighter regulation on banks, disappointing earnings and fears that China may slow bank lending.
The dollar surged higher versus the euro for the second straight week as the euro (EUR/USD pair) fell to its lowest exchange rate since July 30th on Thursday at the 1.4029 level. The dollar also increased for the week versus the Swiss franc, British pound,
The largest gain for the dollar this week was against the Canadian dollar with a 287 pip increase followed by a 282 pip advance versus the New Zealand dollar (see chart). The dollar also rose by over 200 pips against the euro and the Australian dollar.
The Japanese yen, meanwhile, gained ground for the second straight week versus these other major currencies with the exception of the U.S. dollar, which the yen has climbed against for three weeks in a row. The yen increased by over 300 pips this week versus the euro (+360 pips), the Canadian dollar (+329 pips) and the New Zealand dollar (+322 pips).
The yen also rose by 297 pips over the British pound, by 286 pips against the Australian dollar, by 230 pips versus the Swiss franc and by 95 pips against the U.S. dollar.
The U.S. stock markets ended the week with three straight negative sessions as the Dow fell by roughly 217 points on Friday and finished the week 537 points lower. The Dow’s 4.1 percent drop for the week marked the largest decline since March when stocks started 2009’s remarkable uptrend. The Nasdaq decreased by 60.41 points on Friday and declined by 3.6 percent for the week while the S&P 500 dropped by 24.72 points on Friday to a 3.9 percent weekly decline.
Next week will be another interesting and potentially volatile week in the forex markets with many major economic releases coming out. Interest rate decisions by the U.S. Federal Reserve, the Bank of Japan and the Reserve Bank of New Zealand are all due in the middle of the week while there will Gross Domestic Product reports from Canada, the U.K. and the U.S. There will also be new and existing homes sales data, durable goods and consumer confidence data out the U.S.
Have a great weekend.
