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On Tuesday the euro hit a 2-1/2-month low versus dollar, effected by concerns about the health of euro zone banks, while traders have also been prompted by a slip in German economic sentiment to dump the single currency.

According to Reuters data, the euro fell to $1.4527, which is its weakest since early October. The currency has extending losses after the German ZEW think tank said economic sentiment fell in December, suggesting that there would be a slow recovery in the country.

Report by Austria’s Die Presse

The Euro was also knocked by a report by Austria’s Die Presse which said that monetary authorities had put Oesterreichische Volksbanken, on a watchlist. This bank is the nation’s No. 4 bank. It has been said by the bank that the report was not correct.

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On Tuesday the euro hit a 2-1/2-month low versus dollar, effected by concerns about the health of euro zone banks, while traders have also been prompted by a slip in German economic sentiment to dump the single currency.

According to Reuters data, the euro fell to $1.4527, which is its weakest since early October. The currency has extending losses after the German ZEW think tank said economic sentiment fell in December, suggesting that there would be a slow recovery in the country.

Report by Austria’s Die Presse

The Euro was also knocked by a report by Austria’s Die Presse which said that monetary authorities had put Oesterreichische Volksbanken, on a watchlist. This bank is the nation’s No. 4 bank. It has been said by the bank that the report was not correct.

Read the full story

On Tuesday the euro rise against the dollar, reversing earlier losses as a firmer-than-expected German sentiment survey offset concerns about the country’s banking sector.

Rise in the German Ifo

A bigger-than-expected rise in the German Ifo November business climate index has helped the euro. The index rose to 93.9, a level that has not seen since the collapse of Lehman Brothers last year. This has lifted optimism that Germany’s recovery can gain momentum.

Euro

After falling as low as $1.4889 by 1239 GMT, the euro EUR= was up 0.1% at $1.4975. On Monday it hit a one-week high of $1.5001 but has recently struggled to hold above $1.50.

Traders cited options with a strike price of $1.5000 and $1.5050 which were set to expire later in the day.

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On Friday the dollar rise, giving an extension to the previous day’s gains as investors retreated from riskier assets, taking the shine off higher-yielding currencies such as the Australian dollar.

Tokyo’s Nikkei

Today Tokyo’s Nikkei average fell 0.5% and after the U.S. S&P 500 index suffered its worst one-day percentage fall in three weeks on Thursday, it has logged its first four-week losing streak in over a year. On Friday U.S. futures SPc1 were lower.

Banks parked funds into safe-haven assets

Investors reduced dollar short positions, and as banks parked funds into safe-haven assets such as U.S. government bonds so the greenback was also supported.

Three-month and six-month bills

On Thursday rates on short-dated U.S. government paper has dropped, with the 2-year bond yield falling to the year’s low of 0.68%. It has been said by the traders that the three-month bills traded near 1 basis point and six-month bills fell to near record lows.

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For the second straight day on Tuesday the dollar climbed against a basket of major currencies as the investors were prompted by positive U.S. economic data to return to the theme that the U.S. will be at the forefront of a global economic recovery.

With it U.S. interest rates will be pushed and U.S. assets would become more attractive, that will boost the demand for the dollars to buy them.

Sales at U.S. retailers rose

According to data on Tuesday  as government-sponsored auto incentives buoyed demand for motor vehicles, sales at U.S. retailers rose at their fastest pace in three-and-half years in August , it has also showed that sales outside the auto sector also were strong.

A government report showed on Tuesday that U.S. producer prices rose more than twice as much as what was expected in August on the biggest surge in gasoline prices that was ever recorded in more than 10 years and compared with a year ago, prices declined less than expected.

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Against other major currencies,  US currency has shown some firmness as the investors are prompted by a fall in stock prices to flock to their perceived safety.

Dollar Recovered the losses

On Friday the dollar that weakened during early New York trading recovered the losses  during the later part of the session.

Early trading versus the single currency

In Monday’s early trading versus the single currency, the dollar has strengthened and it had climbed to a 4-day high of 1.4523. Right now 1.43 is seen as the next possible target level if the dollar rises further. Friday’s North American deals has been closed by the EUR/USD rally at 1.4582.

Dollar Rise against Pounds

During Monday’s early trading, the US currency rallied to a 4-day high of 1.6599 against the pound, as compared to 1.6679 hit late Friday in New York. On the upside, the next possible target for the cable is seen around the 1.645 level.

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When the inhabitants of a country use foreign currency in parallel to or instead of the domestic currency then Dollarization takes place. The term is not only applied to usage of the United States dollar, but generally it is applied to the use of any foreign currency as the national currency.

Conditions for the Occurrence of Dollarization

Dollarization can occur

• Unofficially, when the foreign currency is given preference over domestic currency by the private agents. for instance deposits are held by them  in the foreign currency because of a bad track record of the local currency.

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Here I will explain you about algorithmic trading , fundamental trading and technical analysis in foreign exchange.

Algorithmic Trading in Foreign Exchange

In the FX market Electronic trading is growing, and nowadays algorithmic trading is becoming much more common. As estimated by financial consultancy Celent, by 2008 up to 25% of all trades by volume had been executed using algorithm, which has been increased from about 18% in 2005.

It is required for an algorithmic trader that he should be fully aware of all the potential frauds by the broker. A check should be included in part of the weekly algorithm to see if the amount of transaction errors at the time when the trader is losing money occurs in the same proportion as when the trader would have made money.

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