Weekly report for 17 – 21. 11, 2008

In the beginning of the week the market participants were expecting the results of the G20 meeting, that took place in Washington during the weekend. But the final declaration was limited to good intentions and appeals to jointly deal with the crisis only. This fact influenced the yen, which consolidated as a result.

The euro received support on Monday by the published EC trading balance, which resulted in a budget surplus of 5,7 billion euro for September against the budget deficit last month. Consequently the pair EUR/USD established session maximum at the level of $1,2700.

The British pound remained under pressure for the whole week due to the expectations for the further reduction of the principal rate by the Bank of England. The sterling also reacted to the negative fundamental releases on England. Thus, the pound dropped on Tuesday after the released information about the UK consumer inflation, which turned to be negative for the passed reporting period. The volume of the UK Retail sales, published on Thursday, showed a decrease for the second month in a row. (The sales dropped for 0,1% after the decrease for 0,4% in September, though the forecasts were at – 0,9%.)

According to the released data on Tuesday in the USA, the net foreign capital inflow in September amounted to $143,4 billion. The capital inflow into the long-term assets increased until $66,2 billion from $21,0 billion last month. This information supported the dollar.

During the Senate hearings on Tuesday the management of Ford, General Motors and Chrysler appealed to the US Congress for a $25 billion line of credit, fearing that otherwise these corporations would go bankrupt with severe consequences for the whole US economy. Meanwhile the US Congress postponed the debates of a bill regarding assisting the country’s automobile industry.

The US fundamental releases were mostly very weak. Thus, the Initial Unemployment claims amounted to 542,000, which was a maximum level since the year 1992. (The experts had forecasted this indicator to grow only until 505,000). And the FRS Philadelphia Fed. Index dropped until its 18-year minimum, and reached the mark of -39.5, while the forecasts were at – 35.

The drop of the European, American and Asian stock exchanges supported the yen. Against the background of the global economic recession, the yen reached on Wednesday its 3-week maximum against the dollar and strengthened its positions against the euro. According to some experts’ opinion, yen is still considered to be a “reserve currency” for the market participants.

On Thursday the Swiss frank reached a minimum level against the US dollar from the June last year due to an unexpected decision to reduce the principal rate until 1% by the Central Bank.

Another week has ended with US dollar growth against the euro, since the drop of the world stock exchanges provoked the demand increase for the risk-free assets, particularly for the US government obligations. Therefore, by the end of the week, the euro showed minimums at 1.2422 and the pound – at 1.4704. The pair EUR/USD closed the week below 1.2600 and the pound – above 1.4850.

The yen grew against the euro, the dollar and other commodity group currencies due to the speculations that the investors would continue to dispose of high risk assets and would increase the demand for the yen in order to redeem their debt liabilities. The market condition still fully depends on the investors’ predominant unwillingness to take risks.