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Commodity currencies may soon see a boost in FX trading. China is considered one of the major economic up and comers, and with it comes vast amounts of money to spend. China has already expressed an interest in diversification, and that country's new investments could especially benefit commodity currencies.
Kathy Lien describes the possibility that China will boost commodity currencies in FX360:
Because of their reliance on commodities, such as oil, gold and other tangible assets, down under currencies and the Canadian dollar do well when trade centers around these things. And with China looking for better returns and a more diverse investment portfolio, it might mean better news for commodity currencies -- and a weaker U.S. dollar in the future.To go out means to look for investment opportunities abroad and by making these comments, China has officially announced that they will be embarking on a spending spree. For investors looking for buying opportunities, they should buy what China buys. In terms of currencies, the most basic need that China has is commodities and their demand could provide support for the Canadian, Australian and New Zealand dollars.
The U.S. dollar is holding steady in currency trading on the FX market against other major currencies. The greenback is stable in forex trading following Fed Chair Ben Bernanke's testimony before Congress yesterday.
In his testimony, Bernanke outlined a plan to limit the effects of inflation due to the massive amounts of cash entering the money system as a result of economic stimulus. This is referred to as an "exit plan", and it is meant to help the dollar retain some of its value, even as it floods the market.
The U.S. dollar is slightly up against the pound and the euro in forex trading, and slightly down against the yen. However, the absence of sudden moves and the stability shown by the dollar in currency trading is being taken as a good sign.Yesterday, the U.K. pound dropped in currency trading on the FX market, thanks to concerns over the budget deficit. Earlier today, though, the sterling got a boost in forex trading as the Bank of England announced its rate decisions. GFT's Boris Schlossberg reports on FX360 on the BOE decisions about rates and quantitative easing:
The news is somewhat encouraging, and provided the pound with a bit of a rebound earlier. However, the sterling is down again in forex trading -- but not by much. So far, currencies have been reasonably steady today.The BoE voted 9-0 to keep rates unchanged at 50bp and noted that GDP contraction in Q2 will likely be smaller than it originally thought. More importantly MPC members decided to keep the present level of the quantitative easing program at 125 billion GBP and made no commitment to increases it in the future stating that they will reassess the situation in August.
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