EUR NEWS: The euro rises against the dollar, buoyed by the announcement of an aid to Spain

EUR NEWS: The EUR gained ground against the USD Monday, in a market driven by the announcement of the aid of 100 billion EUR granted by the 17 members of the EUR zone to Spain, to bail out its failing banking system.

Around 0900 GMT, the EUR bought 1.2602 dollars, against 1.2514 dollars on Friday at 2100 GMT. The single European currency has even reached the start of Asian trading 1.2671 dollars, its highest level for two and a half weeks.
The EUR also rose against the yen at 100.26 yen against 99.49 yen on Friday, climbing even in early Asian trade at 100.95 yen; it’s highest since May 23

The 17 ministers of the EUR area reached Saturday during a telephone meeting an agreement that aims to clean up Spanish banks asphyxiated by their exposure to real estate.
 
The EU loan will reach one hundred billion EUR and will be injected into the Spanish public assistance funds to the banking sector (Frob), which then allocate this money to banks that request it.
Political leaders did their best to deny almost to the end that the country needed aid, Spain's fourth largest economy in the EUR area, has finally accepted the plan making it the fourth country, after Greece, Ireland and Portugal, to receive external assistance.

Analysts at Commerzbank, "the amount is obviously futile to impress the markets and for the moment, it's effective."

However, "if for many it is an agreement on a positive (aid) has been found more quickly than previously thought (the market), which raises some uncertainty (about the future of the EUR area) It remains to be seen if the amount announced will be enough, "warned Huber, an analyst at ETX Capital.

Moreover, the rebound of the EUR supplied by this bailout is likely to be short lived as "Greek elections are now in less than a week and should again focus attention soon," added Mr. Huber.

Indeed, the radical left has always on the rise and the plan calls for the cancellation of creditors for the recovery of the economy based on a strict austerity, while wishing to maintain the country in the EUR, what revive Traders' concerns before the new vote on Sunday.

Around 0900 GMT, the British pound fell against the EUR at 80.93 pence per EUR, after falling to its lowest level since May 1 (81.68 pence) in early Asian trade. The pound rose against the greenback at 1.5570 USD.

The Swiss franc (CHF) was stable against the EUR at 1.2012 Swiss francs to the EUR and rose against the greenback at 0.9532 Swiss francs to the USD, after reaching 0.9479 franc in early trading Asia, its highest for two and a half weeks.

The ounce of gold was worth 1,594.40 against $ 1,576.50 USD Friday night.

The euro is down against the dollar, still weighed down by the euro area

The EUR fell against the dollar Friday always, in a market disappointed by the U.S. Federal Reserve (Fed), which has hinted no new measures to help its economy while there are increasing concerns about global growth.

Around 1800 GMT (8:00 p.m. in Paris), the euro bought 1.2498 dollars against 1.2561 dollars Thursday at 2100 GMT.

The euro retreated against the yen at 99.29 yen against 100.01 yen Thursday.

The dollar fell against the yen at 79.45 yen against 79.58 the previous day.

"As expected, the rebound of the euro against the dollar during the past few days has run out of fuel," commented analysts at Commerzbank.

While investors were expecting a strong gesture of the Fed in light of the deteriorating economy in the world's largest economy, its chairman Ben Bernanke has simply reiterated Thursday that he chairs the institute would "maintain a policy highly accommodative monetary "without giving further details.

However, the rise in the unemployment rate to 8.2% in the U.S. in May, had sparked speculation that the Fed may decide to inject additional liquidity into the economy, at the next meeting Ordinary its Monetary Policy Committee (FOMC), scheduled for 19 and 20 June

New injections of funds from the U.S. central bank in the world's largest economy would dilute the value of the dollar, making it less attractive to traders, but also, by increasing liquidity in the market, giving boost purchases of riskier assets.

In this context, the optimism generated by the surprise cut in interest rates reference to China, a first since 2008, has quickly fell.

Furthermore, the disappointing comments from Mr. Bernanke said Thursday the downgrade of Spain by rating agency Fitch, three notches (A to BBB), and two notches to be considered a speculative investment, mentioning in particular the "fiscal cost of restructuring and recapitalization of the Spanish banking sector".

Fitch was also accompanied by a negative outlook, meaning it could again deteriorate this country in the heart of the debt crisis of the euro area.

This promises to be reinforced fears about the country's ability to finance markets, while Spain had to concede rates rise again in a bond issue Thursday, noted analysts.

The market fears that Spain brought in the wake of Greece, Ireland and Portugal, to seek external financial assistance to stem the crisis.

However, the main risks to the euro, that is to say, "that Spain would need a bailout and an output of Greece in the euro area, are already integrated into the course, this should limit the decline "of the single currency by the Greek elections of 17 June, tempered Kathleen Brooks, an analyst at Forexnews.

And even if the Spanish government, hostile to an assistance plan for its overall economy, ensures that no decision taken yet on a possible request for assistance for its banks, a Saturday meeting of senior officials of the euro area , dedicated to this issue, was in the air in Brussels.

Around 1800 GMT, the British pound remained stable against the euro at 80.88 pence per euro and fell against the greenback at 1.5448 dollar.

The Swiss franc was stable against the euro, Swiss franc to 1.2008 per euro, and retreated against the greenback at 0.9608 Swiss francs to the dollar.

The Chinese currency finished at 6.3703 yuan against one dollar for 6.3638 yuan yesterday.

Forex

If the fundamental level, the level of exchange rates on the forex is based on the principle of supply and demand, the volatility of the forex exchange rates and also respond to this foundation, but they also obey different variables, less structural.

First of all, economic variables (publications, statistics and indicators) and significantly influence the abrupt currency. These economic indicators and statistics are published at fixed times, and the impact on the currency is immediate. If these variables generate spectacular movements in the short term, the corrections can be particularly brutal.

Among the important statistics, there are fundamentals such as GDP growth figures from the U.S. or the Euro zone or, another example, the U.S. unemployment rate. These are different economic elements, before publication, analyzed and estimated. The market reaction occurring between the results published and what was expected.

Monetary variables are mainly related to levels of interest rates.

When significant differences appear between the sustained interests of two or more currencies, movements in exchange rates will occur so that a risk-free investment in one of the currencies is equivalent to the risk-free investment of the same maturity in the other currency.

Typically, a currency with high interest rates or interest rates higher than those of other major currencies attracts capital and investment. C is in this context that the decisions and comments from central banks are particularly followed. Of course, this is especially true with high acuity and for the decisions of American central banks (Federal Reserve) and European (European Central Bank).

Variables speculative are variables related to the behavior of stakeholders.

A large number of investors and refer only focus on what the charts say. It is based on the results of the engineering analysis that the positions will occur in the forex with impacts, more and less important on the valuation of exchange rates, which will depend on the size of the volumes managed by stakeholders.

A number of major players, such as financial institutions and hedge funds, taking into account both the technical analysis and both the fundamental analysis. The most important of these players are called the Insiders. It is often those whose positions will move to end the trend of forex and exchange rates.