First of all you’ll need is a motive to trade fx. More than likely one reason will be to make money, however there are actually others who  prefer to trade Forex for the rush or even the leisure value.

The very next thing you’ll want to trade Forex will be a Forex trading plan. Much like any business fx trading needs a system in order to be effective. In the event you Head into a lender and would like to get yourself a loan for your business enterprise you need to be well prepared to accomplish this with your business strategy. In the same manner prior to starting to trade foreign exchange you should present yourself with your foreign exchange trading strategy. I realize the fact that looks slightly weird however , act as if you were investing the cash for someone else to trade based on your FX trading plan. Should you look at the plan and decide you will not commit then it’s time to go back to the drawing board and develop a completely new Foreign exchange trading strategy.

You need an FX brokerage service so that you can place your trades. Foreign exchange brokers vary greatly in their degrees of competence and quality of service. Searching for a suggestion from a friend is definitely a good notion when you are evaluating a dependable Forex brokerage. There is certainly a single hard and fast guideline here that is if at any point during your dealings with an fx broker you discover that you don’t have confidence in them it is undoubtedly the perfect time to find a new broker…simply no exceptions.

Productive forex trading requires a Foreign exchange  strategy. The Foreign exchange trading strategy or strategies that you employ all will be one part of your fx trading plan. The foreign exchange  trading system will show you items like which forex pair to trade, when to enter, the moment to exit, and so forth.

The Foreign exchange trading system you construct will certainly dictate a thing vital, that is how much starting investment capital you should use. It is really an often ignored, but important aspect in productive fx trading. Numerous beginning traders fund their particular forex trading accounts with basically short- term success in mind. This may be like just putting 1 quart of fuel in your vehicle before starting off on a 1,000-mile journey.

Those are some of the very essentials of what is necessary before starting fx trading. Prep is key in any business achievement. This is especially valid whenever forex trading in the global currency trading markets in forex trading.

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FOREX-Euro to fall on contagion fear; US jobs data eyed – Yahoo! Malaysia News

* Euro/dollar may decline towards $1.25 by year-end

* Euro zone debt crisis, Korean conflict to lift US dollar

* U.S. nonfarm payrolls report also in focus

By Wanfeng Zhou

NEW YORK, Nov 26 – The euro should extend losses against the dollar in the near term after its worst week in over three months on fears Portugal and Spain will be next to need bailouts after Ireland.

Technical charts and option trading also suggest increasing bearishness on the euro. The euro slid to a two-month low at $1.32 on Friday and was down 3.5 percent this week, on pace for its biggest weekly percentage drop since mid-August.

Concerns over a deepening debt crisis in the euro zone and escalating tensions in the Korean peninsula could lift the safe-haven U.S. dollar. The greenback could get an added boost if a key U.S. jobs report next Friday beats expectations.

“The bigger question is will Spain and Portugal remain immune and I would look and say, 'no',” said Greg Salvaggio, vice president of trading at Tempus Consulting in Washington.

“The situation in the euro zone will continue to deteriorate,” he said, adding the euro could drop “below $1.30 and perhaps as low as $1.25 by year-end.”

The premium investors demand to hold Irish and Spanish government bonds rather than German benchmark Bunds hit new euro lifetime highs on Friday. Portuguese bonds also underperformed after a report said the majority of euro zone states and the European Central Bank were urging Portugal to apply for a bailout. For details, see [ID:nLDE6AP08Y]

European officials said reports Portugal was under pressure to seek a bailout were “absolutely false”. Spain on Friday ruled out that it needs help to manage its finances. [ID:nLDE6AP08Y]

Nomura currency strategists Jens Nordvig and Charles St-Arnaud said the outlook on Spain, which accounts for 11.8 percent of euro zone economy, will be a primary driver of the euro in the coming weeks.

“In a scenario where Spanish spreads widen to Portugal's current levels, we see the risk premium on the euro increasing from around 10 percent to above 20 percent, and this could see the euro trade all the way to 1.23 against the U.S. dollar,” they wrote to clients. “The big question is whether this is the central case.”

BEARISH ON EURO, KOREAN CONFLICT

On Friday, the euro last traded at $1.3239 , down 0.9 percent on the day, after falling as low as $1.3200 on trading platform EBS. The euro hit a four-year low of $1.1876 in June in the wake of the Greek debt crisis.

Bearish momentum in the euro will likely continue after the currency breached several key support levels this week, including its August high at $1.3334 and the 61.8 percent retracement of its August to November rise at $1.3232.

Next support comes in around the 200-day moving average at $1.3131, followed by $1.3080, the 50 percent retracement of the euro's June to November rally.

Ashraf Laidi, chief market strategist at CMC Markets in London, said a close below the important $1.3250/60 trendline support could see the euro/dollar slide towards $1.27.

In the options market, risk reversals have showed increasingly bearish sentiment on the euro, while analysts at Credit Suisse noted “significant buying of bearish euro structures against the dollar, yen and the Swiss franc.”

On Friday, one-month euro/dollar risk reversals traded at -2.3 , with a bias toward euro puts, suggesting more investors are betting the euro will fall than rise. That was down from -1.6 on Monday. In mid-October, euro/dollar risk reversals traded near neutral levels at -0.55.

Investors will also closely watch developments in the Korean peninsula, which will likely benefit the dollar as safe-haven demand rises.

Analysts said the dollar should also benefit if U.S. housing and jobs data next week comes in stronger than expected, which would reinforce expectations the U.S. economy is outperforming that of Europe.

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PAKISTAN – Market factors to watch – Nov 12 – Yahoo! Singapore News

KARACHI, Nov 12 – Following is a list of events in Pakistan as well as news stories and press reports which may influence financial markets.

(Reuters News welcomes your feedback and for any queries please contact Chris Allbritton in Islamabad editorial on +92-51 281 0017 or via email at chris.allbritton@thomsonreuters.com or on Reuters messaging chris.allbritton@thomsonreuters.com)

MARKET SNAPSHOTS

* The rupee ended firmer at 85.37/42 to the dollar on Thursday, compared with Wednesday's close of 85.46/51 due to higher remittances by overseas Pakistanis [PKR/].

* The Karachi Stock Exchange's benchmark 100-share index < .KSE> ended 0.34 percent, or 36.70 points, lower at 10,905.24.

Volume fell to 125.22 million shares, compared with 221.29 million traded on Wednesday. [.KA]

* Foreign investors bought shares worth a net $1.26 million on Thursday.

* Cisco's discouraging outlook dragged Wall Street lower on Thursday, but the market fought back in a sign the bullish trend remains intact.

The Dow Jones industrial average < .DJI> fell 73.94 points, or 0.65 percent, to 11,283.10. The Standard & Poor's 500 Index < .SPX> shed 5.17 points, or 0.42 percent, to 1,213.54. The Nasdaq Composite Index < .IXIC> lost 23.26 points, or 0.90 percent, to 2,555.52. [.N]

* Oil dropped more than 1 percent on Friday as concerns about Irish debt sent investors scrambling for the safety of the dollar, unwinding positions across commodities.

U.S. crude for December fell $1.01 to $86.80 a barrel at 0252 GMT, after touching a 25-month intra-day peak of $88.63 on Thursday. ICE Brent slid 88 cents to $87.93. [O/R] * Gold inched lower on Friday, reversing gains from the previous session, but worries over Ireland's debt woes are likely to provide support, as investors closely watch the outcome of the Group of 20 summit.

Spot gold inched down 0.3 percent to $1,405.51 an ounce by 0034 GMT, reversing gains in the previous session.

FOR PAKISTAN ECONOMIC INDICATORS, CLICK ON [ECI/PK]

FOR KARACHI INTERBANK RATES, SEE

FOR PAKISTAN OPEN MARKET CURRENCY RATES, CLICK ON [PKR/]

FOR PAKISTAN COTTON RATES, SEE [COT/KAR]

FOR PAKISTAN PORT ACTIVITY, CLICK ON [SHP/PK1][SHP/PK2]

FOR KEY GLOBAL ECONOMIC NEWS, SEE [TOP/MACRO]

FOR AN OUTLOOK OF ASIAN STOCK TRADING, CLICK ON [STXNEWS/AS]

TOP NEWS ON ASIAN COMPANIES [TOP/EQA]

FOR INTERNATIONAL FOREX NEWS, HIT [FXNEWS]

FOR WHAT INVESTORS ARE SAYING ABOUT GLOBAL DEALS [DEALTALK/]

GLOBAL STOCKS – BUY OR SELL? [BUYSELL/]

IN THE NEWS REUTERS PAKISTAN (Click on [PK-RTRS]

> Karachi blast highlights dangers for police investigator [ID:nSGE6AA0Q1]

> Suicide car bombs kills at least 15 in Karachi [ID:nLDE6AA21L]

> EU capitals approve trade aid package for Pakistan [ID:nLDE6AA18K]

> Pakistan's forex reserves fall to $16.95 bln [ID:nSGE6AA0NP]

> Pakistani stocks end down; rupee firmsl o/n rates flat [ID:nSGE6AA0M1]

> Pakistan launches campaign to fight corruption [ID:nSGE6A30AY]

> Pakistan to meet IMF team on Nov 13 for more talks [ID:nSGE6A40B4] (For more Reuters coverage of Pakistan, see: http://www.reuters.com/places/pakistan)

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FOREX-Euro falls as confidence in Ireland slips – Yahoo! Philippines News

Currency bid prices at 11:41 a.m. EST . All data taken from Reuters calculated from the levels at 4:30 p.m. in the previous New York session.

Last US Close Pct YTD Pct 2009

Nov. 10 Change Change Close ————————————————————- Euro/dlr 1.3652 1.3782 -0.94 -4.64 1.4316 Dlr/yen 82.470 82.290 +0.22 -11.23 92.900 Euro/yen 112.60 113.41 -0.71 -15.36 133.03 Dlr/swiss 0.9770 0.9707 +0.65 -5.65 1.0355 Stg/dlr 1.6125 1.6122 +0.02 -0.18 1.6154 Dlr/cad 1.0062 1.0000 +0.62 -4.34 1.0518 Aus/dlr 0.9963 1.0058 -0.94 +11.05 0.8972 Euro/swiss 1.3342 1.3378 -0.27 -10.02 1.4827 Euro/stg 0.8466 0.8548 -0.96 -4.44 0.8859 Nzd/dlr 0.7789 0.7831 -0.54 +7.54 0.7243 Dlr/Norw 5.9351 5.8570 +1.33 +2.45 5.7934 Euro/Norw 8.1050 8.0791 +0.32 -2.30 8.2955 Dlr/Swed 6.8320 6.7366 +1.42 -4.58 7.1602 Euro/Swed 9.3355 9.2850 +0.54 -8.83 10.240 All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ World central bank news [CEN] Economic Forecasts… Official rates…[INT/RATE] Forex Diary…….[MI/DIARY] Top events……..[M/DIARY] Diaries………..[DIARY] Diaries Index……..[IND/DIARY] Press Digests…..[PRESS] Polls on G7 economies..[SURVEY/] European markets……[MARKETS/]

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FOREX-Euro struggles after slide; data helps dollar – Yahoo! Malaysia News

* Peripheral euro zone worries seen weighing on euro

* Embattled U.S. dollar helped by strong jobs data

By Ian Chua

SYDNEY, Nov 8 – The selloff in the euro eased slightly early in Asia on Monday, helping the single currency maintain a foothold above $1.4000, but worries about peripheral euro zone sovereigns looked set turn up the heat on the euro.

Now that the U.S. Federal Reserve meeting and outcome have come and gone, the market will be increasingly focused on developments in fringe euro zone countries, traders said.

Last Friday, both the cost of protecting Irish government bonds from default and the 10-year Irish bond yield spread over benchmark German debt hit record highs, weighing on the single currency.

JPMorgan analysts said bond managers have increased their periphery underweights and warned each move higher in spreads would make it less likely that Ireland will be able to access the primary market next year.

“Given the broader spread widening on the periphery and some ebbing in euro zone data and some pick-up in U.S. data, I'd suggest the euro may be a sell this week,” said Greg Gibbs, strategist at RBS in Sydney.

“If it pans out, the euro could move back down towards $1.35.”

The euro dropped from a 10-month high around $1.4281 set last Thursday to $1.4051 , versus $1.4031 late in New York on Friday. Against the Japanese currency, the euro fetched 114.14 yen , after having fallen from above 115 yen.

News the Greek government has apparently won enough support in local elections to press ahead with an austerity programme gave the euro only a slight reprieve. [ID:nLDE6A6068]

The dollar bought 81.22 yen , steady from the New York close, but up from a 15-year low of around 80.21 yen plumbed last week.

Dollar/yen is flirting with the 21-day moving average, and capped at around 82 yen, where a lot of dollar selling from Japanese exporters are expected.

The embattled dollar rose last Friday after data showed a surge in employment last month as private companies hired workers at the fastest pace since April. [ID:nN04265378]

But prospects for the greenback to perform against higher-yielding currencies remain weak at best, as the market sees the Federal Reserve's commitment to inject $600 billion to boost a flagging recovery as greenlight to use the dollar as a funding currency.

Bernanke on Saturday defended the move, saying it was 'critical' for global stability that the U.S. economy regains its strength.

< ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Link to PDF on Fed decision: http://r.reuters.com/cyh73q

For more stories on Fed policy: [FED/AHEAD]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Against the gloomy U.S. and euro zone backdrop, commodity-based currencies such as the Australian dollar are likely to remain favoured.

The Aussie was last at $1.0146, not far off a 28-year peak of $1.0182 scaled on Friday.

“We see the Reserve Bank of Australia still looking to hike rates over coming months and tentatively pencil in a 25-basis-point December hike,” said Nomura's analysts.

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FOREX-US dollar rises after jobs report; outlook uncertain – Yahoo! Philippines News

* Strong job gains spark recovery optimism

* Pimco FX manager says euro may struggle

* But Mellon Capital reverses bearish view on euro

* Euro/dollar sentiment in options market darkens

By Wanfeng Zhou

NEW YORK, Nov 5 – The dollar could be near a bottom versus the euro and yen after strong jobs data raised confidence in the U.S. economy, but the greenback is set to remain weak against high-yielding and emerging market currencies.

The dollar soared on Friday after data showed U.S. employers added 151,000 jobs in October, blowing past expectations of a 60,000 rise and marking the fastest pace of hiring since April. For details, see [ID:nN04265378]

The report followed two days after the Federal Reserve committed to inject $600 billion to boost the flagging recovery and left some investors open to the possibility the dollar may have carved a bottom against the euro and yen, despite the prospect of more monetary easing.

Any signs the U.S. economy is gaining momentum could prompt investors to close out some of their massive short dollar bets accumulated in recent weeks, lifting the greenback.

Data from the Commodity Futures Trading Commission on Friday showed the value of the dollar's net short position stood at $24.53 billion in the week ended Nov. 2, slightly up from a net short of $23.11 billion the previous week. [ID:nN0537627]

“It is very unclear if the U.S. dollar will sustain this weakness against the yen or euro,” said Michael Hasenstab, portfolio manager of Templeton Global Bond Fund and co-director of Franklin Templeton Fixed Income Group's international bond department.

“It is important to note that within the G-3 economies the U.S. is not alone in its easy monetary policy,” he added. “The European Central Bank continues to provide large amounts of liquidity within its financial system to address bank and sovereign credit vulnerabilities, and Japan continues to embark on equally aggressive monetary easing.”

Franklin Templeton Fixed Income Group has more than $280 billion in assets under management.

In late trading, the euro was down 1.2 percent at $1.4031 , a day after hitting a 9-1/2-month high of $1.4283 on trading platform EBS.

“We're having indications that the economy is turning in the right direction. The U.S. is regaining some traction,” said Thomas Kressin, senior vice president and lead portfolio manager of Pimco's Global Investor Series FX Strategy Fund in Munich, Germany.

The currency fund has assets under management of about 100 million euros .

DIVIDED VIEWS

Concerns about the euro have also risen after Ireland's austerity budget prompted a widening in peripheral euro zone bond spreads. [ID:nLDE6A40HF]

Pimco's Kressin said “it's just a matter of time before the market refocuses on the domestic issues in the region.”

Investors in the options markets also turned increasingly bearish on the euro. The euro/dollar risk reversal, a barometer of currency sentiment, has indicated a growing negative view on euro/dollar and the euro's “put” bias has deepened. On Friday, euro/dollar risk reversals traded at -1.5 , with a bias to euro puts, down from about -0.55 in mid-October.

But Jonathan Xiong, director and global investment strategist at Mellon Capital Management, said his firm recently reversed its bearish view on the euro.

“We're now fairly bullish on the euro. It's actually one of our largest overweight positions,” he said. “The U.S. is heading down a very inflationary path. But in the euro zone, they're holding up the currency value fairly well because they're controlling inflation.”

Xiong is part of a team that oversees $28.6 billion in assets in San Francisco.

The dollar rose 0.7 percent against the yen to 81.31 . The Bank of Japan concluded a policy review without easing further. See [ID:nTOE6A400Q]

While the dollar's fortunes may improve somewhat versus the euro and yen, analysts expect to see it continue to weaken versus emerging market and high-yielding currencies such as the Australian dollar.

“Continued and aggressive quantitative easing by the U.S. is one of the factors that will likely lead to a further fall of the U.S. dollar versus the currencies of countries that are not pursuing such lax monetary policy, such as those in non-Japan Asia,” Hasenstab said. (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by )

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PAKISTAN – Market factors to watch – Nov 2 – Yahoo! Asia News

KARACHI, Nov 2 – Following is a list of events in Pakistan as well as news stories and press reports which may influence financial markets.

(Reuters News welcomes your feedback and for any queries please contact Chris Allbritton in Islamabad editorial on +92-51 281 0017 or via email at chris.allbritton@thomsonreuters.com or on Reuters messaging chris.allbritton@thomsonreuters.com) WHAT IS HAPPENING IN PAKISTAN, ALL TIMES LOCAL FOLLOWED BY GMT:

* State Bank of Pakistan to sell 150 billion rupees worth of treasury bills at a fortnightly auction on Wednesday.

MARKET SNAPSHOTS

* The rupee ended weaker at 85.87/92 to the dollar on Monday, compared with Friday's close of 85.83/88 to the dollar, amid higher import payments, especially for oil, dealers said.[PKR/]

* The Karachi Stock Exchange's benchmark 100-share index < .KSE> ended 0.57 percent, or 60.13 points, lower at 10,538.27.

Volume was 80.54 million shares compared with 104 million shares traded on Friday. [.KA]

* Foreign investors bought shares worth a net $3.74 million on Monday.

The Dow Jones industrial average < .DJI> was up 6.13 points, or 0.06 percent, at 11,124.62. The Standard & Poor's 500 Index < .SPX> was up 1.12 points, or 0.09 percent, at 1,184.38. The Nasdaq Composite Index < .IXIC> was down 2.57 points, or 0.10 percent, at 2,504.84. [.N]

* Oil edged higher on Tuesday, with investors cautious ahead of expected monetary easing from the U.S. Federal Reserve, capping gains from Saudi Arabia's upward shift in price tolerance.

U.S. crude for December rose 12 cents to $83.07 a barrel at 0258 GMT, while ICE Brent nudged two cents higher to $84.64. [O/R]

* Gold ticked up on Tuesday after a drop from a two-week high spurred bargain hunting, but investors were reluctant to make big bets ahead of the U.S. Federal Reserve's policy meeting, which could determine the fate of the dollar.

Gold added $3.36 to $1,353.61 an ounce by 0253 GMT in slow trade. It had hit a two-week high at $1,365.49 in Asia on Monday, but then suffered from a lack of follow-through buying. [GOL/]

FOR PAKISTAN ECONOMIC INDICATORS, CLICK ON [ECI/PK]

FOR KARACHI INTERBANK RATES, SEE

FOR PAKISTAN OPEN MARKET CURRENCY RATES, CLICK ON [PKR/]

FOR PAKISTAN COTTON RATES, SEE [COT/KAR]

FOR PAKISTAN PORT ACTIVITY, CLICK ON [SHP/PK1][SHP/PK2]

FOR KEY GLOBAL ECONOMIC NEWS, SEE [TOP/MACRO]

FOR AN OUTLOOK OF ASIAN STOCK TRADING, CLICK ON [STXNEWS/AS]

TOP NEWS ON ASIAN COMPANIES [TOP/EQA]

FOR INTERNATIONAL FOREX NEWS, HIT [FXNEWS]

FOR WHAT INVESTORS ARE SAYING ABOUT GLOBAL DEALS [DEALTALK/]

GLOBAL STOCKS – BUY OR SELL? [BUYSELL/]

IN THE NEWS REUTERS PAKISTAN (Click on [PK-RTRS]

> Pakistan resuming gas oil imports after 2-month halt [ID:nSGE6A1043]

> Pakistan sets ambitious wheat target for 2011 [ID:nSGE6A00CC]

> Cricket-Suspended Pakistan duo say no evidence against them [ID:nLDE6A017D]

> Pakistani stocks end lower; rupee weakens; o/n rates flat [ID:nSGE6A00H6] (For more Reuters coverage of Pakistan, see: http://www.reuters.com/places/pakistan)

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Yahoo! News

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FOREX-Euro gains vs dollar on Fed easing view – Yahoo! Malaysia News

* Euro pushes higher vs dollar on Fed easing view

* Dollar reverses gains made on Geithner comments in WSJ

* Traders cite Asian demand boosting euro vs dollar

By Naomi Tajitsu

LONDON, Oct 21 – The euro rose against the dollar on Thursday as investors piled into the single European currency in the belief that the interest rate differential with its U.S. counterpart will continue to widen.

The dollar relinquished gains made earlier in the day as investors reckoned comments from U.S. Treasury Secretary Timothy Geithner ahead of a G20 finance ministers meeting may not have warranted a brief jump in the U.S. currency.

The dollar stayed under broad selling pressure, hovering near a 15-year low against the yen as it continued to take a beating on speculation the Federal Reserve may implement more dollar-negative quantitative easing next month.

Expectations of more Fed easing have driven three-month interbank dollar rates lower. At the same time, euro zone rates have risen to their highest since July last year, widening the spread between the two.

Some analysts said this widening spread, which indicates U.S. and euro zone rates are expected to diverge further, was helping push the euro higher.

“The majority of the market sees a positive interest rate differential in the euro given the difference in euro and dollar money market rates,” said Stephen Gallo, head of markets analysis at Schneider Foreign Exchange.

“There is an ongoing diversification away from the dollar, and that's increasing demand for euros,” he added.

By 0956 GMT, the euro had climbed 0.5 percent on the day to a session high of $1.4050 on Reuters data, recovering from a slide to $1.3874 in earlier trade.

Traders said Asian demand was helping to boost the single currency in early European trade.

Analysts said some emerging market countries may be allowing their currencies to appreciate versus the dollar to avoid being singled out as currency manipulators at the G20 meeting, and were likely to be offsetting that rise by buying euros.

G20 IN FOCUS

Speculation of a grand bargain by the G20 to rebalance the global economy is swirling before finance and central bank chiefs meet on Friday in South Korea to discuss a common path on managing currency, trade and economic imbalances. G20 leaders will meet in Seoul next month.[ID:nTOE69K01G]

But traders said an agreement on currencies was unlikely this week given the ongoing race for some countries to weaken their currencies, and that the market was positioned for more dollar selling heading into the meeting.

The dollar index < .DXY> slipped 0.2 percent to 77.034, staying near a 10-month low of 76.144 hit last week.

The dollar fell as low as 80.93 yen on Reuters data, pulling back from the day's high of 81.82 yen and closing in on 80.84 yen hit on Wednesday, its weakest since mid-1995.

The market is wary that Japanese authorities could intervene to slow the yen's rise again, after they did so on Sept. 15, selling yen for the first time in more than six years.

The dollar reversed gains made after the Wall Street Journal quoted Geithner as saying major currencies were roughly in alignment and that he would use the G20 meet to advance efforts to rebalance the world economy and move toward norms on currency policy.

Investors initially took his comments as a cue to buy the dollar, but analysts argued Geithner's comments did not mark a significant change in U.S. forex policy, adding that this explained the pullback in the U.S. currency's gains. “What Geithner said was not targeted at the U.S. dollar. He was making his position clear before the G20 that the U.S. would not fight everybody on FX, just China,” said Ulrich Leuchtmann, currency strategist at Commerzbank in Frankfurt.

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FOREX-US dollar soars after Chinese rate hike – Yahoo! Malaysia News

* Dollar gains, Aussie tumbles as China raises rates

* U.S. Treasury's Geithner comments support dollar

* China move sparks risk aversion; dollar still vulnerable

By Wanfeng Zhou

NEW YORK, Oct 19 – The safe-haven dollar rallied broadly on Tuesday, while the euro and commodity-sensitive Australian dollar tumbled after a surprise interest rate increase from China prompted investors to cut risk exposure.

Investors feared a quarter percentage point rise in China's one-year lending rate could dampen Chinese and global growth and slow the country's voracious demand for commodities, many of which come from Australia. [ID:nBJI002412]

“China's rate increase instantaneously pushed people to take risk off the table,” said Boris Schlossberg, director of research at GFT Forex. ” is trying to clamp down on growth and that's going to reflect badly on Australia, on Germany, on much of the world economy as it readjusts to the idea that Chinese growth may not be as torrid as expected.”

The Australian dollar, which last week rose above parity with its U.S. counterpart for the first time since 1983, was hit hardest, slipping more than 2 percent to $0.9683 .

The euro was down 1.5 percent at $1.3735 , off a $1.4005 session peak, according to trading platform EBS.

The euro hit a session low of $1.3720 on EBS, the weakest in two weeks, after U.S. stock losses accelerated. The break of $1.3770 opens the door for a test of $1.37, traders said.

The dollar rose 0.3 percent to 81.49 yen , its best daily gain since Japan intervened to weaken the yen on Sept. 15. It hit a 15-year low beneath 81 yen last week. The Australian dollar/yen exchange rate, an important barometer of risk sentiment, fell 1.9 percent to 78.88 yen .

The U.S. currency also rose 1.6 percent to 1.0340 Canadian dollars after the Bank of Canada left interest rates at 1 percent and cut is growth forecast. [ID:nN19118876]

DOLLAR STILL VULNERABLE

Hobbled by zero interest rates and expectations of more Federal Reserve easing to come, the dollar has been under pressure since September. Analysts, however, say the expectations of Federal Reserve easing have been priced in, providing an opportunity for investors to take profits.

The dollar's rebound began after the euro rose above $1.41 last week, an 8-1/2-month high. It continued on Monday after Treasury Secretary Timothy Geithner said Washington would not devalue the dollar for export advantage. [ID:nLDE69I00W]

Analysts said Geithner's comments may mean the United States was trying to ease global tensions over exchange rates ahead of a G20 meeting in November. Washington wants China to allow more rapid appreciation of the yuan. Beijing and others complain that dollar weakness is stoking inflation by pushing money into their faster-growing economies.

Analysts cautioned, however, that the dollar's rebound may be short-lived given expectations that U.S. interest rates will remain low relative to most other major economies.

“The fundamentals are still pretty well lined up against the dollar. I expect it to come under renewed pressure in the near term,” said Daniel Katzive, currency strategist at Credit Suisse in New York.

High-yielding currencies such as the Australian dollar and Brazilian real are likely to attract buyers following their recent retreat, said Societe General strategist Kit Juckes.

He said the market's “gut reaction is to sell commodity block and emerging market currencies” on the China news but added the news was “not a game changer.” (Additional reporting by Steven C. Johnson; Editing by Andrew Hay)

Technorati Tags: forex trading