Foreign Exchange Update : Share Markets Power Forward Causing GBP NZD and GBP ZAR Rates to Plummet

June 1, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Update : Share Markets Power Forward Causing GBP NZD and GBP ZAR Rates to Plummet

The Pound Euro exchange rate (GBP EUR) is 1.1410. The Pound Dollar exchange rate (GBP USD) is 1.6460. The Pound South African Rand exchange rate (GBP ZAR) is 11.2095.

The major theme in the currency markets yesterday was the return of investors’ appetite for riskier assets.

The tone for the day was set with the release of positive Japanese data during yesterday’s Asian session, which showed that Japanese factory output grew by a monthly 1% in April. This compared well with a contraction of 15.5% in Japanese factory production in March, which was brought on by the effect that Japan’s devastating tsunami had on the country‘s supply chain.

Asian share markets rallied on the Japanese figure, as institutional investors gained confidence from the figures from the world’s third largest economy and acted to renew their demand for equities.

The rebound in global appetite for risk was re-enforced during yesterday’s European session as fears of an imminent Eurozone sovereign debt meltdown abated. Comments from German delegates who attended the EU’s emergency meeting over the weekend suggested that they would ease their calls for an immediate ‘re-profiling’ of Greece’s debt.

Meanwhile, Eurogroup leader, Jean-Claude Juncker that a second bail-out for Greece could be in place by the end of June, circumventing the requirement for a re-structuring of Greece’s commitments.

The pick up in global appetite for risk saw the high-yielding currencies gain significant support which caused the GBP NZD exchange rate to drop below the key psychological level of 2.00, close to its record low. Meanwhile, the GBP ZAR rate closed down by 1.92% as investors shifted their assets into riskier and more rewarding shores.

Elsewhere, the Canadian Dollar also made significant gains against the other majors, causing the GBP CAD exchange rate to close down by 1.07% at 1.5929. This move forward for the CAD was largely caused by comments by the Bank of Canada which stated that Canada’s interest rates would rise ‘eventually’. The BoC elected to maintain rates at 1.00% for the time being.

The Canadian Dollar gained further support in its role as a major exporter of raw materials, as investors upscaled their expectations for the global recovery. Yesterday’s move on the GBP CAD market makes it an ideal time for UK citizens to send money home to the UK from Canada.


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