Australia Cuts Interest Rates

Over in Australia, the Aussie dropped against the United States dollar following the Reserve Bank of Australia’s cut to the interest rates. They dropped the rates by a quarter point to a level of 3.25 percent. Although this cut was not a surprise to investors, it still prompted the Australian dollar to fall to $1.0252 versus the greenback. This marks the Aussie’s lowest level since September and a fall of one percent.
 
The Australian economy has been hit hard of late, with the mining sector being one of the biggest casualties due to the demand for products of all kinds dropping on a global scale.
 
Like the greenback, the euro also made gains versus the Australian dollar. By the end of Tuesday’s trading session, the euro rose 1.35 percent to 1.2598 Australian dollars.

Spain to Request Bailout

Investors now believe that Spain will finally be seeking the bailout it needs to prop up its economy. Officials in the Eurozone said that Spain would request the bailout as soon as this weekend. As expectations of the bailout grew, the euro rose in value.

 
Despite the planned bailout, Germany believes that Spain should hold off. Even if Germany is not on board with the bailout plan, any request would be viewed favorably by investors because it would greatly lower Spain’s borrowing costs. It would also make the market in Europe less uncertain and provide a needed measure of stability. Until Madrid requests aid, safe haven currencies like the Japanese yen and the greenback will still remain popular with investors.
 
During Tuesday’s trading session, the euro managed to hold its ground against the United States dollar at $1.2917. This marks a rise from Monday’s three-week low of $1.2802. Support is seen in the $1.2910 and $1.2920 range. If this level is breached, the euro will most likely fall again to $1.2875. These numbers represent a significant fall from the four-month high the euro reached in September. Following the announcement of the European Central Bank’s bond buying plan, the euro jumped up to $1.3169 versus the United States dollar.
 
Euro Rises Against the Yen
 
Europe’s currency gained 0.36 percent versus the yen to reach a value of 100.89 yen. Meanwhile the greenback also rose 0.17 percent to 78.11 ten. These gains came amid remarks by Japan’s finance chief that they would be willing to slow the rise of the yen if necessary. Earlier this week, the dollar reached a one-week high of 78.11 yen.
 
Canadian Dollar Loses Ground Against the Greenback
 
The United States dollar rose from $0.9819 to $0.9841 Canadian dollars during trading on Tuesday. Investors are betting on Canada’s currency in expectation of the labor report that will be released on Friday. Part of the Canadian dollar’s drop was caused by the reversal of equity markets. In early trading on Tuesday, Canada’s currency held steady versus the American dollar.
 
In Asia, the Taiwan dollar strengthened 0.1 percent to $29.385 versus the greenback. This growth came amid positive manufacturing reports and signs that the United States economy is holding steady. Analysts expect that the Taiwanese dollar will remain between NT$29 and NT$29.50 until at least the end of the year.
 
 Ahmadinejad points the figure of blame at the western world.
 
Iranian Rial’s Fall Attributed to Psychological Warfare by Ahmadinejad
  
Iran attributed their devalued currency to psychological pressures yesterday. The president of Iran, Mahmoud Ahmadinejad, attempted to divert criticism away from policies and turn the focus toward Western political battles. Over the last year, the Iranian rial has fallen more than 50 percent versus the United States greenback.
 
Western Sanctions and Psychological Pressures
 
President Mahmoud Ahmadinejad stated that the fall in the rial’s value was caused by psychological pressures caused by the west. Currently, Iran is dealing with significant economic sanctions and a reduced demand for their oil. Sanctions have arisen due to Western opposition to Iran’s nuclear policy. Western nations have strongly opposed the strides that Iran has made in nuclear technology. Afraid that nuclear energy could be converted into a weapons-producing plant, a conglomeration of nations began imposing sanctions on any transactions that involved Iranian currency. These sanctions have targeted oil exports, international banking and imports of western products.
 
Since the sanctions began, Iran has struggled with a weak currency and an inability to sell their exports in the world markets. With Monday’s sharp decline in the rial, imports into the nation have become increasingly more difficult to afford.
 
Iranian President Critiques Parliament
 
President Ahmadinejad believes that the sanctions caused the rapid fall of the rial. Contesting this idea is the Iranian parliament speaker, Ali Larijani. Larijani has claimed that economic issues in Iran could be attributed to government mismanagement as much as 80 percent of the time. The other 20 percent of economic tribulations are caused by sanctions. Some of the government mismanagement problems sourced includes the rise in inflation caused by an increase in the money supply. At the same time, banks held down their interest rates. These combined pressures caused the nation to suffer from rapid inflation. As a result, many Iranians placed their funds in foreign currencies.
 
In response, President Ahmadinejad sharply rebuked this notion. In one statement, Ahmadinejad said that all of the currency fluctuations were caused by a psychological battle with the West. Iran’s enemies, he believes, are deliberately meddling in the currency exchange rates on the streets of Iran.
 
Iranian Rial Falls
 
After dropping 17 percent during trading on Monday, the rial fell again on Tuesday. It is now at a record low of 35,500 United States dollars according to the unofficial street trading rate. On Sunday, the rial was at a level of 29,500. Prior to the economic sanctions, the rial was trading at 10,000 rials versus the greenback.
 
As the Iranian economy struggles to stay afloat, the Iranian president insists that Iran has enough hard currency to get by. Unfortunately for Iranians, the country has experienced an estimated drop of 30 percent in their crude oil contracts. To make up the price difference, Iran is working to market more of their crude oil to Asia. According to the president of Iran, this will be enough to help Iran ride out Western sanctions. If the currency situation does not improve, it could cause more political problems for President Ahmadinejad as he faces re-election.