Pound Continues Drop as Demand for BoE Measures Rise

The pound entered its fourth day of losses against the dollar and the euro, after British financial sector calls Bank of England to expand its asset purchasing program to revive the faltering economy in the United Kingdom.

The British Chambers of Commerce stated yesterday that the already expected economic recovery in Great Britain is not guaranteed and further measures should be taken immediately by the Bank of England, reflecting on the national stock exchange market and currency, the latter losing against virtually all major pairs, mainly to the U.S. dollar, the yen, and the Swiss Franc. According to the group’s call for the asset-purchasing program expansion, the Bank of England should extend the current program to 150 billion pounds and eventually ask permission to go further, considering the U.K.’s contracting economy needs. Factory production unexpectedly fell in May, adding to the already negative outlook for the pound sterling.

The quantitative easing measures asked by the British Chambers of Commerce may revive Great Britain’s economy, but on the currency point of view, the speculations regarding this fact already weigh on the pound, and if the measures continue further, it’s considerably possible that the pound will bottom against the euro and the U.S. dollar, yet, negative news in these markets make it hard to predict what direction the pairs will follow.

GBP/USD traded at 1.6225 as of 10:36 GMT rising from 1.6125 in the intraday, but still in a very low level considering last week’s rate around 1.6400. GBP/JPY remained stable at 154.53 after several days operating negatively.

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Polish Zloty Hits 6-Month High Against Euro

The Polish currency hit a six-month record versus the euro, after getting a World Bank loan to rescue the country from one of the most severe recessions among the European Union bloc members.

After a World Bank statement today indicating that a $4.5 billion dollar loan was approved to the Polish government, the zloty rose more than 2 percent against the euro, as confidence rose among investors towards the future of the Polish economy. Adding to the current attractive profile for the Polish currency, a manufacturing index in Poland indicated the slightest decline in nine months, suggesting that the economy in Poland is recovering.

EUR/PLN traded at 4.3625 as of 6:28 GMT rising from a previous price of 4.4575.

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Yen Drops from Four-Month High on Overprice Speculations

The Japanese yen, which was rallying intensively against all majors after a wave of risk aversion struck markets last week, dropped today as Japanese importers sold the currency led by speculations that after this week’s rally, the yen would be overpriced.

The yen lost today versus all 16 most traded currencies after a Japanese government official affirmed that the current volatility and extreme valuation of the national currency would be unfavorable, stopping immediately the yen’s rally, as investors speculate that the Japanese government may eventually intervene to control further gains of the Asian currency. After speculations appeared last week that the global slump would be deeper and longer, yesterday, the International Monetary Fund predicted a revised global growth for 2010, with rather optimistic figures, encouraging traders to return to higher-yielding options in stocks and in the currency market, consequently damping demand for refuge currencies like the yen and the greenback.

Currency analysts point on charts that the yen’s rally was haste and sharp, and even if being supported by fundamental factors, a correction is a natural consequence after an intense climb. Тhe speculations regarding importers selling the yen to profit also added to the yen’s rally to ease and post the first day of losses since last week’s U.S. jobs report.

USD/JPY rose to 93.22 as of 10:31 GMT after hitting 91.75 the lowest price in four months. GBP/JPY followed, trading at 150.88 from 146.65.

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Australian Dollar Rises on Better-than-Expected Employment Report

The Australian currency rose against the yen from a seven-week low after a report yesterday indicated that unemployment figures in Australia rose less than forecast, spurring demand for the Aussie, which had lost against all majors since last week’s risk aversion wave.

After losing more than 3 percent yesterday versus the yen and the greenback, the Australian dollar initiated a rebound influenced by domestic and international news. A report yesterday in Australia showed better-than-expected unemployment numbers, which even if still on the rise, did not match rather grim speculations from economic analysts, helping the Aussie to gain. The International Monetary Fund stated yesterday that 2010 global economic growth will be higher than previously suggested, stopping low-yielding currencies like the yen to continue its rally, and finally bringing investors back to higher-yielding positions like Aussie-priced assets, as commodity prices also rebounded slightly this Thursday.

Analysts indicated that fundamental factors, even if not optimal served as an excuse for traders to profit, selling the overpriced Japanese currency and opting back for higher-yielding positions in stock markets and in currencies like the Australian dollar and its Canadian counterpart, which rebounded after severe losses during the past days. The Australian may continue to rebound if positive news, even if slight ones, help risk appetite to rise once again.

AUD/JPY traded at 72.82 as of 11:51 GMT after bottoming at 70.87 hours earlier. AUD/USD followed the same movement, being traded at 0.7838 from 0.7717.

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Brazilian Real Rebounds on Commodities

The Brazilian high-yielding currency, declined for almost a week as concerns regarding the global rose, but today it rebounded as commodities rallied, spurring demand for the South American country’s currency.

The Brazilian real had favorable news that supported the currency to post its first gains versus all majors in a week, as car sales in China rose the most since 2006, fueling demand for high-yielding assets. Metallic commodities rebounded today, mainly the copper, after Alcoa Inc. posted smaller losses than forecasts, indicating that demand for commodities may be recovering, a sign that can be interpreted as a global recession easing indication.

USD/BRL traded at 1.9910 as of 19:29 GMT from a previous rate of 2.0175 in the intraday chart.

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