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Euro Declines as Fears Grow

The euro extended its decline today amid mounting concerns about the sovereign-debt crisis in Europe and the ability of the eurozone to keep its integrity, caused by uncertainty about the June elections in Greece and signs that the crisis is spreading.

Spain is the second major worry, following Greece, for European investors, especially after its banks and regions lost access to capital markets. The government is continuously reassure that the country does not need a bailout, and the need to repeat that everything is good may be considered troublesome by itself. Even the powerhouse of the European economy, Germany, shows signs of weakness. Losses were limited, though, as polls showed that pro-bailout parties are gaining votes in Greece.

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Rupee Drops, Can Hurt India’s Economic Recovery

The Reserve Bank of India cut its key repurchase rate by 50 basis points to 8 percent in April and that move was followed by unexpected increase of inflation to 7.23 percent. Now the central bank is in a difficult position as without rate cuts the currency will continue to weaken, leading to growing inflation, but low borrowing costs may also boost inflation. Analysts estimated that gross domestic product increased 6.7 percent in March 2012 from a year ago, demonstrating the slowest rate of growth since March 2009.

USD/INR rose from 55.3750 to 55.1862 as of 18:49 GMT today.

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Canadian Dollar Sees Small Gains

Canadian dollar is seeing small gains today as oil prices rise a little, and as a bit of optimism returns to the markets. There are hopes that Greece will remain in the eurozone, as well as some expectation of a eurozone solution to the sovereign debt problem. All of this is providing a boost for the loonie.

Oil prices are slightly higher on the news that polls indicate that Greeks might put in pro-bailout politicians in after the new elections next month. Oil is helping the loonie against the greenback.

With oil prices inching higher, the Canadian dollar is finding some support. Oil is a major export for Canada, and as oil prices rise, the loonie finds a measure of support. However, the Canadian dollar is also receiving help from improvements in the global economy, and in a more optimistic outlook. Some of the trading is hampered, though, by the Memorial Day holiday in the United States.

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US Dollar Mixed in Forex Trading

US dollar is mixed in Forex trading, with markets somewhat choppy today. Greenback is once again higher than an embattled euro, but the US dollar is lower against commodity currencies. It looks to be an interesting day on the Forex market, even though US markets are closed for the Memorial Day holiday.

US dollar is turning in a mixed performance today, thanks to some of the unique situations at play right now. Greenback is higher against the euro, thanks to continued concerns about what is happening in the eurozone. Last week, Spain had to bailout banking giant Bankia, and there is still wrangling over the idea of eurobonds. No one seems to have a solution to the eurozone problem, and that is weighing on the euro.

However, US dollar is down against commodity currencies like the Canadian dollar and the Australian dollar. With gold and oil prices higher, commodity currencies are getting something of a boost right now. Even the Great Britain pound has turned higher against the US dollar, indicating that there might be some risk appetite in the markets after all. Dollar index is lower overall, in spite of the greenback’s strength against the euro.

At 14:39 GMT the dollar index is down to 82.241 from the open at 82.146. EUR/USD is down to 1.2535 from the open at 1.2578. GBP/USD is up to 1.5695 from the open at 1.5693. USD/CAD is down to 1.0258 from the open at 1.0266. AUD/USD is up to 0.9839 from the open at 0.9816.

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EURUSD Rallies to $1.24 as German Unemployment Rate Falls

The German economy looks unscathed. In fact, while some countries face an unemployment rate of 15 percent, 20 percent, or even 25 percent, the German economy just saw its unemployment rate hit a Euro-zone era all-time low, at 6.7 percent in May against a forecasted 6.8 percent rate, according to a Bloomberg News survey. When compared to all available data, the rate is not just the lowest since January 1999, but also as far back as our data goes, which is January 1991.

The unemployment rate was aided by a labor market that has proved resilient amid the decline of employment across the rest of Europe. Economists were predicting that the German economy had lost 7K jobs in May after gaining 19K jobs in April; however, no jobs were lost (or gained). When compared to other major economies, such as the United Kingdom or the United States, the German labor market looks relatively resilient; whose counterparts have unemployment rates of 8.2 percent and 8.1 percent, respectively. When compared to other Euro-zone countries, such as France, Italy, or Spain, the German labor market is that much more impressive; these countries have unemployment rates of 9.4 percent, 24.1 percent, and 8.8 percent, respectively.

The Euro gained across the board, most notably against the safe haven currencies, the Japanese Yen and the US Dollar. The EURJPY appreciated from 97.71 to as high as 97.94, while the EURUSD rallied from 1.2393 to as high as 1.2416

After setting a fresh 2012 low today at 1.2358, the pair has rebounded approximately 50-pips, setting up a Hammer candlestick on the daily chart. Typically, this price action indicates bulls closed out the session stronger than the bears, signaling a potential shift in momentum. Indeed, shorter-term charts suggest that rallies may advance as high as 1.2460/80, and it would take a significant fundamental catalyst to drive the pair back above 1.2500. As such, with two key US data releases today with quantitative easing expectations – the ADP employment report and the first quarter GDP revision – it’s very possible the EURUSD rallies up towards 1.2500 ahead of the US cash equity open.

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Yen Gains on Woes of Europe, Flat vs. Dollar

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The Japanese yen gained against most Major currency today as endless woes of European Countries
The not-so-impressive performance of the yen against the dollar may be explained by poor macroeconomic reports from Japan. The unemployment rate unexpectedly increased by 0.1 percentage point to 4.6 percent in April. Retail sales rose 5.8 percent in April, following the 10.3 percent advance in March. The median estimate was 6.2 percent.
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Japan is not too happy about the strength of the yen as it hurts nation’s economy. The minutes of the Bank of Japan’s monetary policy meeting showed that the central bank is going to maintain its accommodative policy. But it does not look like the bank is ready for any aggressive actions and it is questionable if the central bank’s efforts would have any effect on the appreciating currency.
EUR/JPY dropped from 99.66 to 99.35 as of 21:16 GMT today, reaching intraday 98.93 — the lowest rate since January 19. GBP/JPY was down from 124.59 to 124.32. At the same time, USD/JPY traded at about 79.49, following the rise from 79.45 to 79.64.
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Europe Drives Loonie to Monthly Loss

The Canadian dollar fell today, heading to a monthly loss against the US dollar and a second straight monthly drop versus the Japanese yen, as the crisis in Europe eroded demand for currencies related to growth. Unsurprisingly, Canada’s currency managed to outperform the euro.

The European sovereign-debt problems is spreading and it does not look like European leaders have a solid plan to contain the crisis. Signs that the fast-growing Chinese economy is slowing also does not help commodities and currencies related to them. July futures on crude oil, the major export of Canada, were down 0.3 percent to $90.56 on NYMEX today, erasing its previous advance.

Canadian currency often gets help from the recovering economy of the nation’s neighbor — the United States. Today, though, US macroeconomic reports only hurt the loonie. The Standard & Poor’s Case-Shiller House Price Index fell in March on an annual basis. On the positive side, the decline was slower than in the previous month and the index rose on a monthly basis. A really unpleasant surprise was an unexpected drop of the Conference Board consumer confidence. Analysts predicted that the sentiment index would rise from 68.7 in April to 69.8 in May, but the gauge dropped to 64.9 instead.

USD/CAD was up from 1.0236 to 1.0257 as of 17:36 GMT today, following the earlier drop to 1.0206. CAD/JPY declined from 77.58 to 77.39, erasing its previous advance to 77.85. EUR/CAD slipped from 1.2837 to 1.2802, while the daily minimum of 1.2792 was the lowest since May 15.

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