Wednesday, 22 December 2010

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Saturday, 4 July 2009

### Commodity Currencies

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he Commodity dollars declined against many of the majors today following US and European news that pointed to further economic slowdowns and thus, additional declines in demand for commodities. If economic activity declines or remains near current levels, prices on crude and other commodities will lose the support of projected demand increases that had propped them up for some time. In this regard, while the Canadian, Australian, and New Zealand countries are among the first to show signs of a recovery from the global crisis, a sharp drop in commodity prices could sharply alter conditions. As such, if global contraction continues and demand for basic materials declines, the currencies could continue to take a hit.(source web)

####Euro Volatility Likely as Central Bank Delivers

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A busy week of economic event risk left the Euro almost exactly unchanged against the US Dollar, and it seems markets remain incapable of breaking the EURUSD from its multi-month range. Forex options markets showed that volatility expectations remained high ahead of the European Central Bank interest rate decision and the US Nonfarm Payrolls report, but sharp post-NFP moves were incapable of pushing the EURUSD below the key 1.4000 mark. Illiquid late-week trading invited a brief foray below the psychologically significant 4000 level, but a quick bounce signaled that few were willing to force a larger breakdown in the key currency pair. If the combination of an ECB rate decision and a US NFP release were not enough to break the Euro from its range, we see relatively little scope for big moves in the week ahead. Indeed, short-term volatility expectations have fallen substantially ahead of what may be yet another week of range trading.

Euro Zone economic event risk will likely take a backseat to broader financial market flows as the Euro/US Dollar pair remains tightly correlated to key risky asset classes. The rolling correlation between the EURUSD and Reuters CRB commodity index is once again near record-highs. It is subsequently unsurprising to note that Gold, Oil, and the US S&P 500 remain in similarly choppy price ranges prices through the past month of trading. The end-of-week tumble in the S&P index leaves it at risk for continued declines, but we will have to see a noteworthy break before calling for similar moves in the EURUSD.

Traders should keep an eye out for financial market reactions to the US ISM Services report and surprises from final revisions to Euro Zone Q1 GDP results. The former will shed light on the all-important US Services sector and has historically produced big moves in the S&P 500 and US Dollar. Markets remain on edge following a worse-than-expected NFP result, and we will need to see promising signs for US economic conditions to bolster investor confidence. A sharp drop in domestic equities could easily lead to similar moves in the US Dollar—potentially sending the EURUSD below key support. Later-week GDP figures could likewise provide impetus for Euro volatility. Recent revisions to Q1 UK GDP results sent the British Pound substantially lower against major counterparts. Although admittedly unlikely, similar changes to Eurostat’s estimates for domestic economic growth could send the Euro lower versus major counterparts.

EURUSD volatility expectations remain muted, but we cannot rule out flare-ups in financial market tensions. It will be critical to watch whether many many key asset classes can break out of their month-long trading ranges—potentially sending the EURUSD beyond range-lows at 1.4000 or highs near the 1.4200 mark.(source web)

###Australian share market higher despite miner gains

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THE share market closed flat after earlier gains were whittled back despite gains in resources sector gains and a positive lead from Wall Street.

At 16:15pm (AEST), the benchmark S&P/ASX200 index was up 3.3 points, or 0.09 per cent, at 3877.3 points, while the broader All Ordinaries index advanced 2.9 points, or 0.07 per cent, to 3875.2 points.

Ord Minnett private client adviser Jona post June 30 market malaise had produced a quiet trading day for brokers.

"All the rush has been getting clients to take up their rights in Rio and share purchase plans in ANZ," he said.

The local market was following a positive lead and stronger copper price in offshore trading overnight.

Mr Hancock said and rebounded today.

BHP Billiton finished up 40 cents, or 1.18 per cent, at $34.30, while Rio Tinto gained 15 cents, or 0.29 per cent, to $51.75.

Rio Tinto successfully completed the UK leg of its $US15.2 billion ($18.78 billion) equity raising after its largest shareholder ended speculation to take up its full entitlement.

Aluminum Corporation of China (Chinalco) took up its full entitlement despite fears it may snub the offer, after a planned $US19.5 billion ($24.09 billion) deal with Rio Tinto fell through last month.

By 16:20 AEST major stocks in the gold sector were stronger, with up 92 cents at $31.20.

Dual-listed Newmont Mining gained 13 cents to $5.18 andfirmed five cents to $2.98.

At 16:22 AEST, the spot price of gold in Sydney was $US939.50 per fine ounce, up $US7.90 on yesterday's close of $US931.60.

Commonwealth Bank led the banking sector mostly lower, shedding 67 cents to $37.42 as funds managers reweighted their portfolios, Mr Hancock said.

ANZ lost 12 cents to $16.13, Westpac eased 10 cents to $19.58 and NAB firmed 16 cents to $21.85.

Telstra enjoyed high trading volumes, with more than 53.2 million shares changing hands and its share price was two cents higher at $3.37, Mr Hancock said.

Major media stocks were mixed, with Fairfax Media two cents weaker at $1.17 and down two cents at $2.23.

News Corporation (the parent company of the publisher of news.com.au) gained 16 cents to $13.26, while its non-voting scrip advanced 15 cents to $11.60.

On the Sydney Futures Exchange, the September share price index contract was 12 points lower at 3849 on a volume of 19,676 contracts.

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