The euro against the dollar crashes and suffers historic crashes against the yen

Brussels - October 24, 2008 - The currency market is boiling. The Japanese yen has been the big winner today with a sharp revaluation against the dollar and the euro. The pound and the Community currency have been the big losers of the day. The single currency has come to losing the level of 1.25 U.S. dollars to stand at their lowest price since October 2006.

The euro (EURUSD) managed to close yesterday with a rebound by 0.62% against the dollar, after six consecutive sessions of cuts. The joy lasted little because today has been devalued by around 2% and has touched a low of 1.2497 in the session, the lowest level since October 2006.

The market punished with force to the euro after a request from Belarus, Ukraine and Iceland aid to the IMF and the bad macroeconomic data from the different countries of the region, pointing to a more than likely lower rates.

The single currency has been devalued by 14% so far this year for the greenback. The loss was 10% in the month of October. The euro this year marked a record high at 1.6038 U.S. dollars.

Analysts Bolságora Ecotrade valued at as a very real possibility that trading continues receding positions at upcoming dates until potential turning points that do not appear until 1.21 and 1.1650.

A shelter called U.S. dollars

The dollar also rises to maximum of five years versus the pound. The U.S. currency is benefiting from the worsening financial turmoil, which encourages investors to dispose of their investments around the world and increase their positions in the dollar, which was taken as a shelter. Analysts also point out that the turbulence has led many U.S. investors to repatriate funds.

"The easing of the interbank market reflects the reduced risk on the financial system as a whole, mean that investors see the dollar again, again, as the safest currency, and that given the strong depreciation incurred, will have the greatest potential Revaluation long term, "analysts suggest X-Trade Brokers.

The yen soars

The dollar (USDJPY) has reached a 6.55% drop against the yen and reached to touch 90.93 yen, its lowest level since August 1995 when the U.S. currency touched a low record. The euro (EURJPY), meanwhile, declined by 9.52% and touched a low of 113.91 yen, the lowest since May 2002.

Emerging markets, from South Korea to Mexico, have been hit by the credit crisis in recent weeks, as concerns about a sharp slowdown in growth has been invited to undo the risk positions that had accumulated in recent years .

This aversion to risk leads to discard the positions of carry trades, prompting the rise of the yen. The carry trade allow investors to borrow in currencies with low interest rates as lajaponesa to buy assets in higher returns elsewhere.

"Nobody is willing to take risks in the current circumstances and risk aversion will only accelerate," said a Reuters Mitsuru Sahara, the Bank of Tokyo-Mitsubishi UFJ.

Experts from X-Trade Brokers stress that the strength of the Japanese currency affects very negatively on the country's exports, which weigh about 20% of GDP in Japan. "We must pay close attention to statements from both the Bank of Japan as the Ministry of Finance and that proceedings in the same market can produce significant movements of the currency", they recommend.

So far this year, the yen has appreciated 18% against the U.S. dollar, a 18% on the Swiss franc, 28% in relation to the euro, and 34.6% compared to the pound sterling.

My Opinion

It is clear that as the euro lost strength, due either to countries like Belarus, Iceland and Ukraine seek support for the IMF in order to save the situation, leaving the dollar supported.

Speaking of emerging countries, the currencies of Mexico, as the weight is suffering the ravages of the crisis, as the Bank of Mexico has been auctioned off amounts ranging from 6,500 million dollars to make the Mexican Peso continued to have its value but with results ephemeral because even though the measures taken, the Mexican peso has been going down to a lesser extent, it is expected that the Mexican peso against the dollar will be worth 14 pesos per 1 dollar.

Source: El Economista