Dollar Weakens After Release of US Jobs Data

The dollar went further down on after the release of the US jobs data. The information that was released has resulted in speculations that the Federal Reserve is more likely not raising interest rates until the second half of the year.

Last Friday, the employment data was closely monitored and showed that US non-farm payrolls increase by 126,000 in March. This figure was the smallest increase since December 2013 and way below the forecasted 245,000 value. The only positive data that came out was that hourly earnings had a gain of 0.3%.

This latest employment information is a chain of indicators that shows the US economy is not really doing so well and this makes the Fed more careful in decisions regarding raising interest rates.

The dollar deteriorated as U.S. Treasury values decreased as a result of the soft jobs data last Friday though the thin trading might also be due to the Good Friday holiday. The standard 10-year note yield dropped to a 2-month low of 1.8% last Friday. The final figure was 1.83%.

Saudi Arabia Increases Crude Prices for Asian Sales

OPEC giant Saudi Arabia increased May prices for all May crude sales to Asian countries after the nation’s oil minister noticed improvement of global demand.

Saudi is the biggest crude exporter in the whole world.

Government-owned Saudi ARAMCO reduced the markdown for Arab Light grade crude making May pricing higher by 30 cents higher than April. It also raised prices of four other grades it exports to Asia.

In a forum at Riyadh last March 23, Oil Minister Ali al-Naimi Global declared demand for crude is improving and his country can fulfill demand from any nation. Saudi Arabia was pumping an almost exceptional level of roughly 10 million barrels daily.

ARAMCO as well as other oil producers in the Middle East reduced pricing to Asia so it can compete with Africa, Latin America and Russia. As a rule, gulf countries sell to Asian refiners under long-term contracts through a premium or price cut to the standard of regional benchmarks such as Dubai and Oman oil.

According to oil market analysts from Kuwait, Saudi Arabia has developed substantial market share in the region and are not bothered by competition from other crude oil suppliers. It is the main reason why Saudis can bring up selling prices to a certain extent.

However, the country should be prepared to fortify its status in Asia because producers from Latin America also have the capacity to ship more oil to the region.

There are other alternatives for Asia in terms of sourcing oil supply, analysts added. The market share of Saudi Arabia can drop by 2020 in case it does not augment exports to Asia.

Life Insurers in Taiwan Now Faces Higher FOREX Risks

The Taiwan Ratings Corp. released a report that life insurance firms are going to face bigger risks than the Taiwanese banks. The report said that this is because insurance companies in this country have bigger amounts of assets that are in foreign currencies.

The report called “Taiwan's Life Insurers Face Higher Foreign Exchange Risks than Banks,” Taiwan Ratings reported that interest rates have remained low and profits for the financial sectors have stagnated thus many life insurance firms and banks look for more assets outside the country. The unfavourable economic condition of Taiwan is causing this to happen.

The released report said that Taiwanese life insurance providers have a big amount of cash because of the premium they have locally and that they are more interested to invest outside the country to get more earnings.

Stated in the report is that banks in Taiwan are less sensitive to foreign currencies and that they are more cautious of the risks involved when getting into such investments.

Taiwan Ratings is a local holding firm of a U.S.-based credit rating agency Standard & Poor's.

AUD and NZD Pair Outlook

There is a probability of a 1:1 exchange rate between Australia and New Zealand as the currency pair is trading at a lower and steadier path.

AUD and NZD peaked at 1.0798 and even went up 1.0108 although parity is seen within the next few weeks.

Market experts say a rate reduction by the Reserve Bank of Australia will certainly push the currency pair towards parity as interest rate differential between the two will continue to expand.

This may be a problem for both economies but more for New Zealand which is confronted with lower demand because of declining prices of milk. The appreciating currency can affect growth of other export products.

Meanwhile, the Reserve Bank of New Zealand is expected to react to the Aussie dollar and Kiwi exchange rate just like in the past.

Analysts say the RBNZ may even intervene if the Aussie central bank cuts rates next week to prevent a freefall of the AUD and NZD exchange rate. They believe that FOREX markets will obtain momentum and price moves can be extremely unstable surpassing fundamental drivers.

The problem is contesting a currency’s escalation may be difficult prospect and the Kiwi seems to merit high valuation. Economic forecasts have pointed out that steady for the rest of this year while the Australian currency must become stronger on its own.

However, observers maintain there is inadequate economic momentum that can lead to a stronger Australian dollar. Nevertheless, stakeholders still see parity between these two currencies.

Iran Continues Oil Production

Iran, a member of the Organization of Petroleum Exporting Countries, is expected to restore oil production after finally reaching a nuclear pact with Western powers.

The initial agreement formulated on Thursday indicates the Gulf country may resume exports in a few months after negotiations are finalized by the end of June, according to sources from COMMERZ Bank and UBS AG. Overseas consignments from Iran have been decreased 50 percent by sanctions imposed during the middle part of 2012.

Iran’s return to the world oil market hints at crude price recovery which other OPEC members expect within 2015. Minutes after the accord was published, Brent oil dropped to as much as 5.4 percent.

Under this treaty, European Union nations and the US will lift economic restrictions after International Atomic Energy Agency inspectors confirm Iran’s compliance with restraints on its nuclear agenda.

Brent declined by more than ½ from a one year-month high last June due to global oversupply. Oil futures for delivery in May prolonged losses following the announcement of the concord in Lausanne, Switzerland. It ended at $2.15 or $54.95 per barrel at ICE Futures European exchange in London.

Additional price losses could be checked since there is no assurance a final deal will be completed by June 30, according to top officers of BNP Paribas SA.

The structure was settled between Iran and the United States, United Kingdom, Germany, France, Russia, and China. The framework prescribes a timetable for Iran’s enhancement of uranium and confines it one location. It also allows global monitoring during the next 25 years.

Meanwhile, OPEC Secretary-General (Abdalla El-Badri) forecasted that international oil markets will attain a balance within the second half of this year.

Analysts also pointed out Iranian output may increase twofold current existing surplus and push Brent oil back to a 5 and ½ year trough.

GBP and EUR Currency Pair

Outlook remains unstable for the pair of UK pound sterling and euro although the recent weakness may have come to an ending. However, investors preferring the British currency should expect a large movement in the sterling’s volatility going towards the general elections in May. Stability will only rule as soon as a new government comes to power, according to analysts.

The economic calendar of the United Kingdom was overshadowed by the Bank of England’s final Gross Domestic Product report for 2014. GDP came in at 0.6 percent which is more than the projection of 0.5 percent made by economists. In other words, GDP in its entirety increased at 2.8 percent during the previous year. This is the most significant growth since 2006 primarily helped by positive export data which pushed the pound sterling forward.

Meanwhile, figures for business investments were quite unsatisfactory coming in 0.9 percent lower compared to the reading last quarter. GBP and EUR pair was volatile the whole day due to upbeat growth which touched a high of 1.3837 and broke resistance point of 1.3799. GBP and EUR pair is now trading at 1.3788.

On the other hand, the UK pound and US dollar moved on a parallel trend and climbed from a low of 1.4754 before increasing to a high of 1.4844. The pair is presently trading at 1.4818.

The shared currency gave up more than one percent versus the dollar because of the face-off between the Greek Government and its creditors regarding the new debt reform structure.

According to the European Central Bank, there was decrease in the jobless rate from 11.4 to 11.3 percent. Lowest rates were posted by Greece with 26 percent followed by Spain with 23.2 percent and Germany with 4.8 percent.

Canada also disseminated its GDP numbers (decline from 0.3 to 0.1 percent) from January which frustrated the market. GBP and CAD increased roughly one percent because of said release and currently trading at 1.8795.

FOREX Reserves of Emerging Economies Dwindle

FOREX reserves of upcoming economies declined in 2014 after 20 years as emergent economies were beleaguered by decreasing competition, capital depletion and concerns about US fiscal policies.

Economic observers say the downfall can impede the capacity of emerging markets to continue acquiring US and Euro Zone liabilities. This trend has accelerated growth in the region during the past decade.

Majority of market experts agree emerging markets went through the stage of high reserves and may see their stockpile of foreign currency decline within the next few months.

Meanwhile, the International Monetary Fund disclosed aggregate FOREX reserves in emerging economies dropped from $114.5 billion in 2014 to $7.74 trillion. This is the initial yearly drop since IMF data progression started in 1995. During their highest point, up-and-coming market reserves touched $8.06 trillion in May of 2014.

According to statistics from the ING Financial Services based in Holland, debility for the 15 rising economies pointed out this regression picked up the pace during the first two months of this year when reserves shrunk by $299.7 billion. Growth of emerging market reserves from $1.7 trillion in 2004 is the cornerstone of international economies for the last 10 years.

Substantial capital emerging markets gained from trade excess, portfolio inflows and direct investments were reprocessed into Euro and US debt markets to subsidize debt-spurred progress in developed economies.

In case emerging markets cannot build up FOREX reserves, savings surplus worldwide may be deceptive instead of being real.