To ensure future weekly updates get to your
inbox, please add: @moneycorp.msgfocus.com to
your safe list or email address book.
The AED - UAE Dirham weekly update 29 Jun 2009
In this week's
update: NOT MUCH ACTION AND NO NET MOVEMENT
Sterling wobbles after hitting seven-month trade-weighted high. Global growth concerns fail to help the dollar.
The United Arab Emirates will take no part in the planned Gulf Co-operation Council single currency. Whether or not the UAE's lack of participation will scupper the whole scheme remains to be seen but it does remove any doubts about the dirham's thirty-year-old peg to the US dollar at Dh3.6725=$1. It will remain in place and the sterling/dirham exchange rate will continue to depend entirely on what happens to sterling/dollar.
A 15 fil range kept sterling between Dh5.95 and Dh6.10. It opened in London this morning at Dh6.04, unchanged on the week.
The week began with another line-up of international bodies moping about the economic outlook. The European Central Bank, the World Bank and the Organisation for Economic Co-operation and Development upped the ante on economic shrinkage with downgrades either of their forecasts or their optimism. Where previously the World Bank saw the global economy contracting by 1.7% this year, it now envisages GDP falling by 2.9%. The OECD sees "a very difficult 2009, with negative growth in the OECD area. Unemployment problems are going to continue to linger." Jean-Claude Trichet of the ECB said that "Currently, we are still in the downturn phase..."
The gloom lasted for all of 36 hours but it coincided with sterling's trade-weighted index touching a seven month high. Even though no finger was pointed directly at the UK economy the dent to confidence reflected badly on sterling: If you can't sell the pound at a seven month high, when can you sell it?
Sterling took another knock on Wednesday when the Bank of England governor and one of his sidekicks appeared before parliament's Treasury Select Committee. Both admitted to concern about how quickly the economy will pick up after the recession. It did not help maters when Governor King described the government deficit as "truly extraordinary".
There was an almost total drought of UK economic data. It left investors with almost nothing upon which to make their decisions, hence the lack of focus on sterling's direction.
The US dollar got its only break from that outburst of economic gloom on Monday. By the following day investors were selling it, despite a 2.4% monthly increase in the number of existing (as opposed to new) home sales and a two-point improvement in the Richmond Fed's manufacturing index. The reason for selling the dollar was a vague fear that the Federal Open Market Committee - the Fed's monetary policy decision-makers - would extend its programme of quantitative easing.
In the end that did not happen, so there was a small relief rally for the dollar. It was helped along by a 1.8% increase in durable goods orders and an increase of nearly 5% in orders for non-defence, non-aircraft, capital equipment: Companies must be investing for growth. Increases in both of the weekly jobless figures (new claims and continuing claims) dashed any potentially positive impact from an upward revision to first quarter US GDP. At an annualised rate of -5.5% the US economy shrank by 1.4% in Q1. It was not a huge improvement over the previously-reported -1.5% but it was a step in the right direction.
Having held firm three weeks ago the technical support at Dh5.80 looks solid. Unfortunately, the resistance at Dh6.10 looks equally rigid. The break, when it comes, is more likely to be upward than downward but that does not remove the need for protecting the downside. Buyers of the dirham should place a stop order somewhere south of Dh5.80 and be patient. The cautious strategy is still to buy now half the dirhams you will need. If you feel comfortable in doing so, leave a larger percentage uncovered in anticipation of a proper rally but do not forget that stop order.
For more information and expert guidance on the currency markets, call Moneycorp today on +44 (0)20 7589 3000. Alternatively go to www.moneycorp.com where you can open a free, no obligation Trading Facility.
TTT Moneycorp Limited has been certified
to ISO 9000 Quality Assurance since 1996
Moneycorp is a trading division of TTT
Moneycorp Limited. This publication has been provided for general
information only. Neither TTT Moneycorp Limited nor any person
involved in this publication accepts any liability for any loss or
damage whatsoever that may directly or indirectly result from use
made of any opinion, information, data, representation or omission,
whether negligent or otherwise contained in this publication.
None of the information contained in this email
constitutes, nor should be construed as Financial Advice. Copyright
2005 TTT Moneycorp Limited.
This email and any attachments
are confidential and may be privileged and are intended solely for
the use of the named recipients. If you are not the intended
recipient, it is prohibited and may be unlawful to use or copy this
email for any purpose or disclose its contents. The views expressed
may not be the views of TTT Moneycorp Ltd and should not be relied
upon. If you have received this communication in error, please
notify TTT at disclaimer@ttt.co.uk
immediately by email or by telephone (+44 20 7823 7700) before
deleting it. Please be aware that emails and attachments may contain
viruses. Thank you for your co-operation.
TTT Moneycorp
Limited is a company registered in England under registration number
738837. Its registered office address is 2 Sloane Street, London,
SW1X 9LA.
To unsubscribe yourself from this mailing list please
follow this link
[*track.css*]
[*track.hidden*]
