Emerging Currencies Rise, Signalling Change for Forex Markets

Joshua Crafter

The US dollar’s recent moves towards forex market dominance appeared to be coming to an end this week after competitor currencies surged ahead in the market.

The euro went up by 0.3% to reach $1.1373, which represents a recent high. However, it was in the emerging market currencies where the bulk of the gains were made yesterday. The South African rand, for example, rose by 0.6%.

Earlier in the week, forex investors were concerned about the impact that the sudden drop in the value of the Turkish lira may have on the markets.

However, after various international moves, such as a large loan from Qatar designed to stabilise the Turkish financial scene, investors appeared more confident in opting for the lesser known currencies instead.

The main victim of these developments, meanwhile, was the US dollar. The dollar index, which monitors the currency in relation to six other major international currencies, went down by 0.2% to 96.554.

However, the greenback’s decline was also due in part to developments on the international trade scene. It was revealed this week that talks will now take place between US Secretary of Treasury for International Affairs David Malpass and an as yet undetermined representative from the country’s main trading foe, China.

Although the two countries are currently locked in a seemingly escalating battle of tariffs on each other’s goods, a group of Chinese representatives are planning a visit to the US to discuss whether the situation can be eased. If trade talks result in the reduction of trading barriers between the two nations, the dollar’s value is at risk of plummeting – a possibility which is partly responsible for its declining performance this week.

Before the outcome of these talks is made known, there are a number of significant economic calendar events for forex traders to look out for.

Thursday will see the release of several major pieces of data from the US, including July building permits and housing starts data. Over in Canada, June’s manufacturing shipments information will no doubt be of interest to CAD watchers. The trading day will be rounded off by producer price index data, both input and output, from New Zealand.

The euro will be looking to preserve its gains from earlier in the week as the bloc undergoes a number of data releases on Friday. Its consumer price index data, both year-on-year and month-on-month, will be released at 09:00 GMT, while current account information is also set to be made available.

Looking ahead to next week, GBP traders will wake on Monday to news from Rightmove looking at the country’s latest housing market performance.

On Tuesday, the minutes of the Reserve Bank of Australia’s meeting may shed some light on how the Australian economy is performing and where monetary policymakers are looking to go next.

Similar developments for Europe are due next Thursday, when the accounts of the monetary policy meeting of the European Central Bank will come out too.

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Joshua Crafter
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