Gold Exchange Rate

Truely one of the most ancient form of investment in the world, the gold has been kept in vast reserves by rich nations and rogue nations alike. Such is the liquidity of Gold that is it can be easily sold for any major currencies in a short period of time, even for large quantities from 1 kg upward to 1 metric ton. It is thus an effective tool to fight against inflation and hedge against risks typically associated with political turmoil or natural disasters.

Which is why most traders consider Gold, to be the actual dominant currency in the forex market.

Currently, Gold trades at  $1462.93 an ounce (of Gold). Compare this to just 3 years back when gold was trading below S1000.00 an ounce, the overall gain would be 15.4% annualised return from your investment if you had bought into Gold.

We forecast that Gold Price will hit a high of 1 ounce of Gold = $1600.00 US Dollars by end of 2011. This is equivalant to a Gold Exchange Rate of $1600.00/ounce. This is due to the fact that the existing uncertainities clouding the global economy (which includes the Japan Earthquake on 11th Mar 2011 and the political unease in the Middle East) will not be resolved soon. We further predict that the Gold Exchange Rate will hit $2000/ounce by the end of year 2013, at the latest.

With the liberalisation of the forex trading market in recent years, most forex traders are given the option to monitor real-time gold exchange rates and make live trades. As a result, there has been more queries with regards to the price direction of Gold and the variance in price uptrend. For a new forex trader, it would be a prudent investment to buy into Gold first, before venturing out into other currencies.

And may everyone strike Gold with their investments.

Euro Dollar Exchange Rate

Both the US Dollar and the Euro went through a topsy turvy 2010. With a very eventful 1st quarter of 2011 passed, the trading mood on the Dollar/Euro has started to heat up with promises of strong return – if you are on the right side of the trade.

Strictly speaking, the Dollar has been trading against the Euro in a relatively narrow band. This is in light of the politcal turmoil unfolding in the Middle East and parts of Africa, as well as the earthquake which struck Japan on 11th Mar 2011. In the past 6 months, the US Dollar (USD) was trading against the Euro (EUR) between a high of 1 EUR = 1.2943 USD and a low of 1 EUR = 1.4244 USD. Currently, 1 EURO trades at 1.4166 US Dollar, or 1 US Dollar against 0.7059 Euro.

To an average tourist planning to trode across the alantic ocean across both United States and the Eurozone, this difference in Euro Dollar exchange rate is hardly significant. To the average forex trader however, this might bode for something bigger in the making. We have to relate back to the recent global events for reference.

As a start, we have to be mindful that there are nations within the eurozone still within the brink of bailout, with the latest country – Portugual having their parliament dissolved. While the Euro is now widely circulated and we could say firmly established, some countries using it are still on a weak financial footing – too much spending by government and give-ins to unions, labour law and pensions, resulting in a less competitive workforce and build up of borrowing. Over a period of time, the loans snowballed and it takes just one small economic crisis to jolt the nation from the comfort of living off debt towards austerity.

We have also seen how major currencies are being challenged by emerging countries. Both the Chinese Yuan (RMB) as well as the Indian Rupee (INR) are fighting to be the dominant currencies. Japanese Yen is being dragged down in terms of its stability with its already low interest rates and natural disasters.

Thus, we expect that in the midst of such uncertainities, there will only be one clear winner – the US Dollar. After all, the Dollar is the world’s most widely circulated currency and the largest in reserves as well. Against the Euro Dollar exchange rate, we predict that 1 USD will hit 0.75 EUR by the end of 2011 and further forecast that 1 USD compares against 0.80 EUR by the end of year 2012.

Hopefully, there will not be major natural disasters like the one seen in Japan which will expedite the expected US Dollar appreciation against the Euro.

West African CFA Franc Appreciating Against US Dollar and Euro

While the political turmoil in Ivory Coast (Côte d’Ivoire) is still unresolved, the West African CFA franc (XOF) has been sent on a upward surge since Jan 2011. From a low of 1 USD = 508.73 XOF on 9th Jan 2011, the XOF has now appreciated to 1 USD = 460.04 XOF, or 1 CPF franc = 0.002174 US Dollar. This is a 9.57% increase within a short span of 3 months.

Note that the West African CFA franc (XOF) carries the same currency value as the Central African CFA franc (XAF), which is used commonly in some central Africa nations.

Most forex traders would be questioning why the XOF does not depreciate despite the situation in Ivory Coast unfolding. Similar to the Euro, the XOF is a actually a currency shared by a grouping of countries, which also include Benin, Burkina Faso, Guinea-Bissau, Mali, Niger, Sénégal and Togo. Thus, while there may be impact on XOF by political uncertainties in Ivory Coast, it could be negated if the financial foundation of currency vis-a-vis the remaining 7 countries remain strong. In addition to that, the XOF is logically tied in value to the XAF (used by 6 central African nations), giving a further stabilising effort on the currencies of both XOF and XAF.

With Laurent Gbagbo currently negotiating a surrender, it is expected that Alassane Ouattara, the United Nations (UN) recognised elected new president of Ivory Coast will soon be able to inherit his administrative powers and bring about sweeping political and economic reforms. Assuming that none of the related countries sharing the XOF and XAF has Read the rest of this entry »

The Radioactive Effect Japanese Yen Has on US Dollar and Euro

When the massive earthquake measuring 9.0 on the richter scale first stuck Japan on 11th Mar 2011, most forex traders are expecting the Japanese Yen to depreciate against major currencies which include the US Dollar (USD) and the Euro (EUR). This was further reinforced by the decline in the NIKKEI stock index- after all, if people do not want to buy into Japanese stocks, there would be less demand for the Japanese Yen.

What surprised most traders however, was the sharp appreciation of the Japanese Yen in the aftermath of the disaster. The Japanese Yen was trading at 1 US Dollar (USD) = 83.0 Japanese Yen (JPY) on 11th Mar 2011. On 17th Mar 2011, the Yen has appreciated by some 5 percent against the US Dollar, rising to a peak of 1 US Dollar (USD) = 78.8489 Japanese Yen (JPY), or 1 Japanese Yen against 0.01268 US Dollar. To complicate things further, the Yen rose sharply after 17th Mar 2011 and now trades at 1 USD = 84.2863 Japanese Yen. Forex traders who panic sold on the Japanese Yen/US Dollar on 17th Mar and thereafter bought back the Yen are now staring at massive losses.

A similar story was encountered for Japanese Yen/Euro traders, where the Japanese Yen slumped to 1 EUR = 110.01 JPY before recovering to 1 EUR = 119.01 JPY.

The question remains on where the Japanese Yen will be heading next, and whether the continued failure by the Japanese Government to rein in the radioactivity at the Fukushima Nuclear Plant will have a long term effect on the Yen. Already, the long term credit rating for Japanese Government issued bond has been cut by Standard and Poor’s (for the first time in 9 years) to AA-.

It is widely predicted that that the Japanese Yen will have a long term depreciation against the Euro and the US Dollar in the long term. This is based on the following analysis:

1. The clean up of the radioactive at the Fukushima Nuclear Plant will be a protracted effort. Besides the environmental considerations, the relocation of Read the rest of this entry »

Bahrain Dinar and US Dollar

With the political situation in the Middle East and part of Africa in political turmoil, most global investors are staying out of the region and allocating their portfolio elsewhere into Asian and European markets.

Bahrain is one of the country plagued with such turmoil. Starting Feb 2011, students and blue collar workers started to make their unhappiness heard, lamenting on the high unemployment rate and lack of political freedom. Along religious line, the Shiite Muslims, spurred by the regional unrest, started to protest against the mainly Sunni government.

As a result, the 2011 F1 race in Bahrain is now postponed indefinitely due to the political standoff between the opposition and the Bahrain Government. There have also been reports of human rights violation in the Bahrain City of Manama where the police forces quarantined a public hospital and used physical force against civilian doctors and nurses, putting the Bahrain government to shame, resulting in the panic selling of the Bahrain Dinar. This is exacerbated in late March 2011, when the Central Bank of Bahrain, located within Manama’s commercial district has been closed off. This further rocks the confidence in the Bahrain Dinar and plunging the Dinar to a new low.

As it stands now, the Bahrain Dinar is set to further depreciate. Currently, 1 Bahrain Dinar trades at 2.6525 US Dollar, or 1 US Dollar (USD) = 0.37701 Bahrain Dinar (BHD). It is expected that the Bahrain Dinar will further depreciate and trade at 1 US Dollar (USD) = 0.39000 Bahrain Dinar by the third quarter of 2011, if the political impasse is still unresolved. Besides the depreciation of the Dinar, it is noted that trading volume had shrunk drastically by 15% since the start of 2011. Forex traders are left wondering if there is still a ready market to sell off the Dinar without getting a big cut off the Bid-Ask spread in the forex market.

As a key trading center in New York, Victor Angksa is left shaking his head while looking into his trading terminal. “Trade on the BHD has dropped so much over the recent months”, he lamented, “so is my commission and my colleagues are considering switching their speciality to another currency”.

Most political analyst believe that it is unlikely for the Read the rest of this entry »