Euro in Strong Increase

The euro had a strong performance and gained over one percent, gaining more than 1 percent against versus the Swiss franc as traders assumed the Swiss National Bank was purchasing euro notes to undermine its own currency.

The common currency rose versus the Swiss tender to 1.06425 francs which is the highest since January 15.

Swiss media reported that the central bank was targeting a rate of 1.05 to 1.10 francs per one euro, based on SNB sources.

While there was no formal statement from bank officials, market strategists believe that this is a form of market intervention of managed scheme to control the currencies.

Meanwhile, the euro went up against the Japanese yen (0.8 percent) at 134.09 yen. This is still far from the two-week peak of 135.35 yen the other day.

The shared euro was boosted earlier by upbeat reports of industrial orders in Germany which moved forward and reached the highest level since the second quarter of 2008.

Losses versus the single currency caused the US dollar to decline roughly 0.7 percent against major currencies and extended the 1.5 percent decline during the last two weeks.

The Aussie dollar also increased against the greenback and traded at $0.7811. It moved up 0.8 percent and moved away from a slump of six years ($0.7627).

China Joins Easing Trend

China trimmed down the amount that cash banks should allocate as reserves to bolster loan guarantees even as outflows of capital and factory slowdown indicted that the national economy is slowing down.

The People’s Bank of China announced that ratio for reserves will decline by 50 basis points or 19.5 percent.

The PBOC is one of the many central banks worldwide that will be easing fiscal policies in 2015. However, Chinese Premier Li Keqiang said world economic and business leaders must not be apprehensive about his nation’s economic progress.

The FTSE China Index (A50) futures in Singapore moved forward 5.1 percent at the NYSE while Hong Kong contracts increased 1.7 percent.

Reduction in required reserve ratio is the first-ever across the board reduction since the middle of 2012. Bank economists from New Zealand and China claim China will infuse a maximum of 600 billion Yuan or $96 billion into the banking system.

Growing risks of deflation, feeble factory and services reports, as well as the tightening on stock market speculations helped spark off this reduction.

To sustain assistance for small entrepreneurs, agricultural workers and the industry along with primary water projects, the PBOC will implement another RRR cut (0.5 percentage point) for urban commercial banks and non-county-level rural banks that lend to small enterprises.

The PBOC promised to implement sensible monetary policies. It will scrutinize the balance between relaxing and tightening rules as well. At the same time, the central bank’s guidance will focus on lending as well as social financing.

Leaders of China will meet where they are seen to set forth the national growth target of roughly seven percent. It is still below the 7.5 percent set for 2014.

The PBOC decreased standard interest rates in November joining the ECB and Bank of Japan in positioning fresh stimulus.

ECB Restricts Greece Access to Funds

The European Central Bank put more pressure on the new government of Greece by limiting access to direct liquidity lines. The ECB referred to concerns regarding the nation’s commitment to current bailout commitments.

This denotes the rising disagreement between Athens and other states in the euro region. This came after Finance Minister Yanis Varoufakis conferred with ECB President Mario Draghi to obtain support for the Greek plan to get rid of the 240 billion-euro bailout and renegotiate the country’s financial obligations to creditors.

In a statement, the central bank opted to rescind the waiver on marketable debt instruments released or completely guaranteed by Greece.

The decision of the governing council was based on reality that it is not workable to presume that the program review will succeed. This is also in accordance with the current policies in the EU system.

Since 2010, Greek lenders managed to obtain funding from the ECB for junk-rated security. With this development, it is now imperative to seek funding from national central banks at higher interest rates. Greece and its creditors are currently in disagreement on this concern with this move triggering the likely departure of the nation from the EU.

The euro declined after this statement was released and traded at $1.1339. It was down by 1.2 percent.

The country’s debt currently committed as collateral under the refinancing scheme of ECB will not be eligible after February 11.

However, the Bank of Greece asserts liquidity will go on since ECB financing can be transformed into Emergency Liquidity Assistance.

The ECB said the aid program will run out on February 28.

Emergency Liquidity Assistance is priced with a yearly interest rate of 1.55 percent compared to the present ECB refinancing charge of about 0.05 percent.

This latest act of the ECB is a hint of more severe position by European creditors. 

Gold Prices Decline

Prices of gold prices dropped more than one percent because of developments in Greece which touched off a recovery in stock markets worldwide.

The precious metal benefited in early trading from profits in various commodities but interest in gold waned later.

Spot gold went down 0.9 percent ($1,263.80 per ounce) after touching a trough of $1,255.21. US gold futures (April delivery) were down 1.3 percent ($1,260.30 per ounce).

Market analysts said there was a bit of repositioning from safe havens with $1,280 being removed. The 50 percent retracement could have set off selling orders.

Gold prices increased over eight percent last month which was the strongest in three years although expectations for interest rate increases in 2015 restricted possible gains.

Gold remains sensitive to data as investors are speculating on when the Fed will possibly bring up rates.

New inflows were seen in gold-supported ETFs with holdings (New York exchange-listed SPDR shares) reaching its highest since last October.

For the rest of precious metals, silver increased 0.9 percent ($17.36) per ounce. Platinum increased one percent ($1,235.25) per ounce while palladium climbed up 0.1 percent at $783.75 per ounce.

Swiss Franc Hits Slump

The Swiss currency reached a two-week slump versus the common EU note and US dollar. This was caused primarily by news that the Swiss National Bank will try to weaken the currency and seeking the exchange rate of 1.05 up to 1.10 francs for the euro.

The central bank did not make any comments.

According to data, SNB deposits increased during the week of January 30 which highlighted numerous bank transactions.

The euro stepped up 1.9 percent against the franc (1.05800 francs) while the dollar was similarly higher at 0.9345 francs.

FOREX strategists say that the central bank is moderating instability and currency movements.

Meanwhile, the single currency traded at $1.13155 and was 0.35 percent higher. The Survey on PMI indicated growth of the manufacturing sector in Spain, Ireland and the Netherlands.

Nevertheless, gains will probably be restricted due to concerns that Greece is having issues with the Union about another debt accord.

The US dollar got back from a low of two weeks against the Japanese yen (116.64) and traded 0.2 percent higher.

Japanese importers bought dollars but market analysts said the currency is still in a weak position after data revealed the economy was slow during the last quarter of 2014.

Stock market investors will surely focus on US data because of feeble GDP growth.

Investors Now Keen on Emerging Markets

Investors are looking at emerging markets indicating that interest in developing nations.

In January, MSCI Emerging Markets attained 0.6 percent and moved past the stock index of S&P 500 for the first time since the middle of last year.

Meanwhile, JP Morgan Chase dollar index for emerging markets increased 0.3 percent. The Institute of International Finance disclosed market investors put some $18 billion in stocks and bonds of these upcoming markets. This quashes the outflow of $11 billion last December which turned out to be the biggest since the middle part of 2013.

These are significant gains since traders were distrustful of BRICs emerging markets after the recent financial downturn. The Index dropped close to five percent in 2013 and 2014 respectively.

This was the time that US stocks gained unparalleled highs. Emerging markets are considered good deals in a progressively more high-priced world. These are expected to progress quickly compared to their developed counterparts partly because of less expensive commodity prices. India, for instance, is deemed with a very strong position as oil importer and a government determined to patch up its economy.

Meanwhile, Indonesia is getting the nod of money managers while Taiwan and Mexico are expected to gain from US economic resurgence. Additional shock absorber for emerging markets is the move of the European Central Bank to take on the €1 trillion ($1.3 trillion) program for stimulus which helped mitigate concerns of international liquidity crisis that could affect emerging markets strongly. In related developments, the Russian currency retreated further as a result of the central bank’s decision to reduce rates. It was weaker by 1.5 percent compared to the US dollar. Currencies in Eastern European came out stronger with the currency of Poland climbing up by 0.8 percent.

Japanese Yen and Aussie Dollar

The Japanese currency remained steady while commodity currencies moderated as apprehensions regarding the Chinese economy affected sentiments upset by the sell off at the New York Stock Exchange.

The dollar dropped to a low of two weeks (116.64 yen). It was down from roughly 117.52 during late trading at Wall Street.

The common currency slipped to a one-week low of 132.00 Japanese yen while the Aussie dollar overcame close to a one-year low of 90.64 yen.

Traders flocked to the safe-haven Japanese note after the US economy became sluggish in the fourth quarter of 2014 and drove treasury yields to fresh lows.

Demand for the yen was propelled by a report indicated activity in China's industrial sector declined for the first time without warning in more than two years.

Weak price manufacturing index in China is expected to reinforce existing negative partiality of markets towards commodity currencies.

Investors did not see any reason to purchase the single currency so it remained only one notch higher than an 11-year slump of $1.1098 last week. It last traded at $1.1317.

The market preferred commodity considering that China is a primary market for numerous resource-exporting nations such as Australia.

An eight percent increase in oil prices did not alleviate the Canadian dollar which hovered near a six-year low of $1.2800 (Canadian) against the US currency.

Market analysts believe the RBA will join the dovish bandwagon. The central bank’s board will meet on Tuesday. It can reduce the cash rate by ¼ point to 2.25 percent or opt for easing in the forthcoming months.

Speculators built short positions on the Australian dollar which fell down to $0.7720 during the past week.