Forex reports Oct. 15th-20th, 2007

The dollar received a short lived support Monday morning after the New York manufacturing sector report showed a strenghtenig to 28.8 in September vs. 14.7 the month before. Efforts of 3 major US banks to create a special fund to guarantee improved liquidity on the credit market sustained the dollar.
In afternoon trading though on Oct. 15th the Greenback fell, with oil prices on the rise at a record of $86 per barrel. Comments of an International Monetary Fund official also weighted on the dollar. The euro was trading at $1.4208. The yen slipped to 117.88.

Tuesday the dollar edged higher ahead of Friday's G7 meeting. European finance ministers are expected to call for a weaker euro and a stronger dollar, in a effort to attend exporters' concerns over the latest currency trends. A strong euro makes European products more expensive on international markets.
In economic reports, capital outflows were reported at a record $163 billion in August - at the peak of the credit market crisis. Capital inflows reached only $94.3 billion for the same month. The monthly loss marks the lowest level since March 2001.

Wednesday trading brought a weaker dollar after a report showed core inflation rose only 0.2% last month. New building permits dropped in September to the lowest level in 14 years. The FED monetary policy comittee is likely to vote for further rate cuts in the light of such data. The next FOMC meeting is schedueled for Oct. 31st and there are fears that the cut could be of half instead og a quoter percentage point.
The euro was buying $1.4160, the Sterling $2.0330. The yen managed some gains, to 116.60 per dollar from 117.88 on Monday.

Thursday the dollar continued to lose ground, reaching $1.4290 against the euro after reports showed an increase in weekly jobless claims, and also major losses on behalf of Bank of America, one of the top three banks in the US. In early trading the euro touched a new record high of $1.4310. All other major currencies posted gains against the dollar.
Euro's next target is $1.4500, and a FEd rate cut combined with rising oil prices might prove sufficient fuel to see this level achieved. The current level of the European currency seems to be inline with fundamentals in the EuroZone, according to an IMF official.

Friday the dollar was initially higher against the euro on profit taking ahead of the G7 meeting, but lost strenght in afternoon trading. A violent drop on the stock market weighted on the Greenback as well. The British pound was buying $2.0500, and the dollar was buying 114.55 yens. The G7 meeting is likely to focus more on asking for a speeding appreciation on the Chinese currency the yuan, and less on the euro and dollar.

For the coming week we expect a dollar favorable correction on most major pairs. If the final G7 statement fails to address the Greenback weakness, the dollar is likely to recover temporarily. What could continue to affect it are the rising oil prices. The yen has room for further gains as well.

Alina Vlaica
Market Analyst
AsesoriaForex, alina@asesoriaforex.com
Saturday, October 20th, 2007 12:39 CT

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