Forex Market Review by AceTrader

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Market Review - 05/03/2009 22:18 GMT

Japanese yen rises on risk aversion as stock markets plunge; ECB and BOE cut interest rates by 50 basis points


The Japanese yen rose across the board yesterday on the back of the selloff in global stock markets as optimism over the earlier news of a larger Chinese stimulus package dimmed and ECB President Jean-Claude Trichet said in his press conference that for growth in the eurozone is likely to remain weak for the rest of the year.

Dollar declined against the yen from 99.69 to 97.72 and the Japanese currency rebounded against the euro and sterling from 125.75 to 122.70 and from 141.50 to 138.06 respectively.
The Australian dollar weakened to 0.6382 on Thursday, giving up some of its gains following the previous day's strong rebound from 0.6285 to 0.6527. The Reserve Bank of Australia left rates unchanged on Tuesday, with economists expecting a reduction of 25 basis points.

The European Central Bank and Bank of England cut interest rates by 50 basis points to 1.50% (record low) and 0.50% respectively as widely expected, with Bank of England Governor Mervyn King announcing quantitative easing measures in order to increase liquidity in the credit markets. The euro and sterling declined against the dollar to 1.3482 and 1.4037 respectively before recovering in New York trading due to short-covering.

Equity markets were unable to hold on to Wednesday's gains and declined on Thursday as investors were also nervous ahead of the release of the closely-watched U.S. non-farm payrolls report (to be released on Friday at 13:30GMT). The Dow fell 281 points and ended the day at 6594 (lowest since April 1997). Weekly jobless claims eased to 639,000 from an upwardly revised 670,000 while factor orders fell by 1.9% in January (more than the consensus forecast of 1.6%).

U.S. non-farm payrolls are forecast to have fallen by 648,000 in February compared to 598,000 in the previous month, while the unemployment rate is expected to rise to 7.9% from 7.6%. Other data to be released on Friday include Swiss CPI and U.K. PPI.

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