In so-called carry trades investors borrow in currencies with low interest rates and transfer the funds to nations with higher rates
| EUR/USD | USD/JPY | GBP/USD | USD/CHF | |
|---|---|---|---|---|
Resistance | 1.3785 1.3685 1.3535 | 103.55 103.30 103.05 | 1.7655 1.7630 1.7600 | 1.1605 1.1490 1.1395 |
Support | 1.3455 1.3390 1.3350 | 101.80 101.55 100.60 | 1.7380 1.7285 1.7140 | 1.1285 1.1275 1.1240 |
The yen fell as state-backed bank rescue plans in the U.S. and Europe helped reduce money-market rates, encouraging investment in higher-yielding currencies. In so-called carry trades investors borrow in currencies with low interest rates and transfer the funds to nations with higher rates. Japan's target rate of 0.5 percent is the lowest among major economies. ``Traders will take a break from buying the yen,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``Short-term rates are falling, showing that calm is returning to financial markets. South Korea's measures are also helping sentiment.'' USD/JPY is currently trading at 102.23 as of 7:38am, GMT.
The Sterling advanced against the dollar and euro on speculation rising stock markets will increase demand for the British currency. A government report this week will probably show gross domestic product contracted 0.2 percent in the third quarter according to economists and traders. The Bank of England reduced the benchmark interest rate by half a percentage point on Oct. 8 in a move coordinated with central banks including the European Central Bank and Federal Reserve. The key rate was lowered to 4.5 percent. The GBP/USD is currently trading at 1.7487 as of 7:54am, GMT.
European Central Bank President Jean- Claude Trichet urged banks to start lending again after policy makers put them ``on the path'' to recovery by pumping record amounts of cash into money markets. ``I expect the banks to normalize their relationships, meaning that they start lending to each other and that they lend to their clients,'' Trichet said in an interview on French radio RTL late yesterday. The banking system is ``on the path to normalization,'' he said. The EUR/USD is currently trading at 1.3483 as of 8:05am, GMT.