The rate of the dollar is stable, despite geopolitical risks…Short review of the market. by OpenForex.com

The rate of the dollar is stable, despite geopolitical risks…Short review of the market.

21:00 03/22/2004

Short review of the market. Last week’s volatility was excessive and the rate of American currency got stronger at the end of the week. On Thursday, the rate of dollar steeply dropped, as a result of rumors about threat of terrorist attack in Europe. However, on Friday, American currency had stabilized, as there appeared rumors that high-ranked member of al-Qaeda is hiding in Pakistan. As for the Euro, analysts think that its stability was harmed by rumors that ECB would probably reduce interest rate in order to revive Eurozone economy. The head of German Ifo Institute Hanz-Verner Zinn stated on Thursday that rise of the Euro was coming to an end, as previous devaluation of the dollar negatively affected current account deficit in the U.S. and the rates of purchasing Euro bank bills and coins were decreasing. “I see two reasons why strong revaluation of the Euro can end: normal reaction of the U.S. current account deficit and European currency saturation of wallets outside Europe”, - noted Zinn. He also pointed to the fact that deficit of current account had always been 2 or 3 years late in reacting to currency moves. “Another reason for the fall of the Euro would be reduction in demand for the Euro, as currency used for concluding a bargain”, - said Zinn. On Thursday, the U.S. Labor Department declared that wholesale prices rose in January, having reflected rise of prices for oil and black mineral oil. Department report notes that PPI rose 0.6%, whereas December index rose 0.2%. Stripping out food and energy, core PPI rose 0.3 percent in January, against estimates of a 0.1 percent gain in December. Analysts had expected 0.4% climb of PPI, whereas core PPI rose 0.1%. Compared to January 2003, total index rose 3,3% and its key component rose 0,9%. Energy prices rose 4,7% in January, whereas December rise made up 1,6%. Gasoline prices rose 14,1% after having risen 3,4%. Prices for motor cars rose 0,6%, after having dropped 0,1% in December. Prices for capital goods, such as machine-tools, equipment and computers, rose 0,3%, whereas December reduction made up 0,1%. Price order for food stuffs reduced 1,4% after having risen 0,1% in December. Prices for intermediate goods, as timber, flour, steel and diesel fuel, reduced 1% in January and 0,5% in December. The level of prices for raw materials that are used on the early stages of production rose 2,8% after December rise 2,2%. In another report that was published on Thursday, the U.S. Labor department said 336,000 people filed new claims for state unemployment benefits in the week ended March 13 compared with a revised 342,000 the prior week. It was the lowest level for new claims since 316,000 in the week of Jan. 13, 2001. Group of economists thought that number of unemployed would rise from 341000 to 345000. Forecasts ranged from 335000 to 350000. The four-week moving average of new claims, which irons out the volatility of the weekly data, slipped to 344,000 from a revised 346,000 the prior week. The four-week average was the lowest since 336,500 in the week of Jan. 27, 2001. Continued claims, the number of people out of work for a week or more, rose 47000 to 3.064 million in the week ended March 6. Labor Department also stated that during the week ended March 6, 33 states and territories of the U.S. declared jobless claims increase and 20 states and territories recorded reduction of the given indicator. As private research organization Conference Board informed on Thursday, leading indicators index, calculated by it, made up 115,1, having rose 3,3% compared to the previous peak value that was recorded in May 2002. January rise indicator was revised aside reduction to 0,4%. Economists forecasted that index would rise 0,1% in February after having risen 0,5% in January (initial indicator). Index of coinciding indicators, i.e. economic indicators coinciding with current phase of economic activity, rose 0,3% compared to January revised rise that made up 0,1%. Index of lagging indicators that lag behind business cycle did not change in February, where as it rose 0,1% in January. The Philadelphia Federal Reserve\'s measure of business activity fell to 24.2 in March from 31.4 in February. Analysts expected slight reduction of index in March compared to that in February. In average, analysts had expected a dip to 30.0. Philadelphia index component, reflecting the volume of new orders, dropped from 27,8 in February to 21,9 in March. Component, reflecting the level of supplies, rose from 19,3 to 22,3. Component, reflecting the level of employment in production sector of Philadelphia and its region, dropped from 12,5 to 12,3. The value of the given component proved to be positive for the sixth straight month, pointing to staff expansion in the sector. Philadelphia index component, reflecting working week duration in the production sector of the region, dropped from 23,6 to 17,9. Component, reflecting output prices of production companies of Philadelphia, increased from 18,9 to 22,6. Component, reflecting prices that production companies of the region paid for raw material, material and complete parts, increased from 43,7 to 53,4. Inventories component dropped from 0,8 to –12,8, thus pointing at steep reduction of inventories. Component, reflecting orders that have not yet been fulfilled, increased from 4,4 to 8,8.

The forecast was created by trans1.