By: DAVID JOHNSON
Currency Dealer, Halo Financial Ltd.
David is a Currency Dealer with Halo Financial Ltd, delivering competitive exchange rates and a personalised service to help property investors, holiday buyers and migrants throughout Europe save time, money and hassle on their foreign exchange transactions.
I FOUND it very hard to type with my fingers crossed because at the time of writing England was about to face South Africa in the Rugby World Cup final. I would have written the report long hand but the editor would never have read the wobbly writing.
The problem is that I am a currency dealer and just when I would rather be studying the team selection, pundits forecasts and spending inordinate amounts of time discussing the finer points of the oval ball game with all the other experts in my local pub, there are also battles being fought on the currency markets and it’s hard to concentrate on the rugby with so many distractions.
Oil is peaking at record highs and even threatening 90 US Dollars per barrel. That strengthens the likes of the Canadian Dollar and Norwegian Krone, both oil exporting nations and these flows drag funds from elsewhere.
Consequently, the Canadian Dollar is stronger than the US Dollar for the first time in three decades meaning that one Canadian Dollar buys more than one US Dollar.
Elsewhere, commodity prices including precious metals are still remarkably strong, causing gold producing South Africa’s Rand to hit its strongest levels against the US Dollar in 16 months. Admittedly, the surprise hike in South African interest rates helped that move but the commodity market was certainly instrumental in forcing the Australian Dollar to hit 20-year highs against the American unit.
And on the interest rate front, it is not only the South African Rand which is making headway; the New Zealand Dollar is hitting all time highs against the US Dollar as New Zealand’s 8.25 per cent interest rate drags in funds from Japan where borrowing costs are just 0.5 per cent.
Losses
Nearer to home, the European Central Bank is off the hook on the interest rate front as is the Bank of England. Both EU and UK inflation figures showed a 1.8 per cent year on year rise in September; below the target levels for both the ECB and BOE and you could probably hear the huge sigh of relief from both banks, especially with the credit squeeze and Northern Rock issues still rumbling on in the background.
There can be no doubt that there are more losses stored up in bank books than we have seen on the surface and that were it not for the European offices of many banks being able to access cheap funding from the European Central Bank, we would have seen a far greater fall out over the US led credit crunch.
Sterling is generally the poor relation in these times of trouble; a slowing housing market, low inflation, stalling employment growth and the prospects of lower interest rates have seen to that.
I am just hoping the drubbing that the poor old Pound is experiencing on the currency markets is not a veiled prophecy of doom ahead of the Rugby World Cup final, especially at a time when the South African Rand is riding so high on the back of a gold rush. What is that Web Ellis Cup made of again?
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