Euro, Australian Dollar Up on U.S. Mfg Data

The euro and Australian dollar moved up early Tuesday on news that manufacturing in the U.S. expanded in September; the first move in positive territory since May.

In response, the U.S. dollar dropped while commodities in general responded by climbing. The euro got a reprieve from three-week lows,

As for factories in the euro zone, they ended the worst quarterly performance since the early part of 2009. China also continues to slow down, although that hasn't been as much of a surprise because of the announcement by Chinese leaders some time ago that they were going to attempt to cool off their fast-growing economy.

The Australian dollar jumped to $1.0366, while the euro climbed to $1.2895, after falling as low as $1.28035 in Monday trading.

Questions concerning the euro remain as uncertainty as to when Spain will officially seek a bailout, and also the possibility of its credit rating being downgraded to junk status by Moody's (MCO).

Societe Generale said concerning Spain, "The Spanish government probably thinks it needs to find a way of presenting the request for assistance as a victory of sorts, just like it did for the bank deal, to its electorate."

Spain has positioned itself to access aid by releasing a budget that has significant cuts for 2013. That also included a series of economic reforms after it banks went through stress tests in preparation of aid.

Australian, New Zealand Dollars Strengthen

Australian, New Zealand Dollars Up

As concerns over the sovereign default of Greece dissipate or at least are discounted into the market, the Australian and New Zealand Dollars have responded by increasing in value.

The lack of concern isn't because the situation in Greece has actually improved, but rather that the European Union is sending stronger signals that it's ready to bailout the country if it comes down to that.

Australian, New Zealand Dollars Up

Commodity Currencies Poised for Growth

Commodity Currencies

Although it's impossible to know the rate of growth and/or strength commodity currencies will grow against the U.S. dollar, it's going to be a good season of time for them as commodity prices are set to increase for some time to come.

When talking of commodity currencies, we're referring to the dollars of Australia, Canada and New Zealand; all countries which rely on commodities as a large part of their economies.

History has shown that for the most part these three currencies move in unison with one another based on how the price of commodities are moving, and so all of them should be a good bet over the next couple of years to strengthen against the U.S. dollar, which continues to collapse in value.

China's seeming resumption of economic domestic growth is a good sign for these three currencies as well, as it implies China is buying up commodities again in preparation for more growth, assuming it's for that purpose and not to protect its own exports and currency primarily, although it definitely entails that.

Commodity Currencies

Commodity Currencies Fall China Reserves Ratio Announcement

China Reserves and Commodity Currencies

After China announced it would be tightening up its reserve requirements for its banks, commodity currencies across the globe fell in value in response to the possibility China demand could slow down, which would hinder what small hope of a minimal economic recovery there is at this time.

The central bank of China said in a statement yesterday that the required reserve ratio would be increased by half a percentage point starting next weak, an obvious action showing China is going to tighten up their monetary policy.

Nations with strong links between their currency and commodities had their currencies hit lows against the U.S. dollar as a consequence of the announcement, which could dramatically influence their value for the year. The Australian, New Zealand and Canadian dollars were especially impacted by the news.

What's interesting about all this, is China seemed to be surging forward on increasing its commodity stocks for 2010, as December imports had increased by 56 percent for 2009, and commodity exports in December grew by a solid 17.7 percent, seeming to imply they were importing commodities based on consumer demand for products.

Even so, in general, commodities are expected to do well this year, but it seems those estimations have been based upon the idea we are actually in a real recovery something in my thoughts is far from being proven as a reality.

China Reserves and Commodity Currencies

Commodities: US Dollar Strengthens

Dollar will collapse in spite of current strength

The U.S. dollar continues to strengthen because of the unique market circumstances, as it improved against euro, British pound, and the Australian and New zealand dollars today.

Against the Japanese yen though, it dropped to a 13-year low, as it's growing into the currency of choice for those seeking safety. At its lowest point against the yen today, the dollar fell to 90.89.

As Watching U.S. Dollar said today, "remarkable factors in the market keep the dollar high against other nations' currencies, as it was up to two-year highs against the euro, while it enjoyed a six-year high against sterling.

"Sterling fell to as low as $1.5270 against the U.S. dollar, while the euro was as low as $1.2498. The Australian and New Zealand dollars also plunged against the greenback, with the Australian dollar taking the biggest hit, falling by 7.6 percent to $0.6213, while the New Zealand dollar was right behind it, decreasing by 6.5 percent to $0.5576."

Looking ahead, the US dollar will eventually collapse as a perfect storm seems to be brewing against it in 2009.

U.S. Dollar Continues to Plunge Against Japanese, European and Canadian Currencies

The U.S. dollar continues to fall against major currencies, as it is flirting with its all-time low against the euro. For the euro, the dollar was only able to buy $1.5208. For the British pound, it increased a little to $1.9859, up from $1.9847.

In late trading in New York, it also fell against the Canadian dollar, going to 1.0042, down from Monday's 1.0074 cents.

The Japanese yen also increased against the U.S. dollar, climbing to 103.14, up from 103.96. Japan's leadership is getting more concerned about the weakening dollar, as it has fallen by over 7 percent in 2008 already. They're concerned that their exports could suffer if it continues at this "abnormally rapid" rate.

This of course isn't bad news for all businesses in the U.S., as manufacturing will benefit from the weakened dollar, as well as tourist-related businesses that attract a lot of international visitors. The question there is if the weakening domestic tourist market will be made up for by foreign tourists. That has yet to be answered.

As far as the Canadian dollar, the Canadian bank cut borrowing rates by a half point; the first time since November 2001. They've indicated more cuts may be on the way in April.

For the Australian dollar, things are going the other way, as they continue to battle inflationary pressures, and continue to raise their interest rates, today increasing it by a quarter point, which now stands at 7.25 percent.