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Forex Trading

Wednesday, December 17, 2008

Aussie, Kiwi Rise on China’s Stimulus Plan

The Australian and New Zealand dollars rose against the U.S. dollar and the Japanese Yen compared to the last Friday’s close levels as the China said that the government will provide $586 billion of liquidity help to the national economy.

The Aussie and Kiwi opened with a huge weekly gap against the dollar and the yen after the news that the Chinese economy, which is expanding at a fastest pace among the world’s largest economies, will get this additional stimulus. $586 billion will be injected gradually and will completely enter the market by the end of 2010.

Although the proposed plan is quite «slow», the traders and investors hope that it will help to revive the demand for the commodities, thus allowing Australia and New Zealand (which are the large commodity exporters) to maintain the better trade and current-account balances.

The news from China makes traders to believe that the global recession may not last for too long, spurring the confidence in such high-yielding currencies as the Australian and New Zealand dollars. Some Forex traders still believe that the carry trade may return to the market soon.

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