Analysts expect high volatility on the markets and stronger dollar in the first half of 2009

For its accurate monthly forecasts for the three most traded currencies on the international FX markets – euro, sterling and yen, UniCredit Group was ranked number one in Reuters’ traditional foreign exchange poll . Every year the renowned news agency ranks the banks around the world that have provided the most accurate forecasts on FX fluctuations.

Having racked up 1,152 points UniCredit leaves behind in the 20 highest scoring banks known leaders on the FX currency markets like Barclays Capital London and Lloyds TSB London. It was the more accurate yen calls, given by the Group’s forecasters that put it forward. The Japanese currency wrongfooted many strategists on the FX markets who had consistently called for the dollar to rise against the yen during 2008, while UniCredit predicted rising of the yen against the dollar during the escalating financial crisis. In the course of the year the yen rose from 112 yen to the dollar early 2008 to hit a high of 87 yen to the dollar in December, its highest rate for the last 13 years. The highest ever volatility of the markets, including of the FX markets, also influenced strongly the sterling which collapsed down to 0.9810 euro to sterling at the end of 2008.

Forecasts for 2009

UniCredit Bulbank’s FX strategists expect in 2009 for the volatility of the FX markets (the term "volatility” shows the extent to which a variable over different spans of time approximates the average for that interval – source BNB) to remain above the average levels for the last 20 years. That presupposes fast and big swings in both directions for most currency pairs, however, the volatility leaders will continue to be the yen cross rates, followed by the sterling/dollar and the euro/dollar.

Concurrently, as global economy heads for recession, some leading central banks get more active on the market and market participants find themselves in an unprecedented situation, avoiding risk will become a major strategy, UniCredit Bulbank strategists predict. They also recalled that on account of the financial crisis 2008 saw unprecedented interventions on the money markets by the central banks. “As the possibility to use monetary policy instruments diminishes central banks worldwide will have to turn to other methods for impact, one of which is intervention on the FX currency markets”, UCB FX experts said.

Forecasting the rates and trends on the FX currency markets in 2009 will be even more difficult after the four major central banks have come up with close interest levels and these are close to zero.

Strong dollar

UniCredit’s strategists expect in 2009 a US dollar that gets stronger due to the gradually rising demand for dollar-denominated assets. The money base increase in USA from pouring in liquidity in fact does not lead to higher inflation. The reason is that although the money base goes up and the inter-bank interest rates go down, lending decreases and the interest rates to end customers do not decrease as much so that the normal outflow between the the money base and the other money aggregates is substantially distorted”, UniCredit Bulbank’s insiders said.

Disclaimer: The opinions expressed are comments and not recommendation for purchase and sale of foreign currency.

Contacts:

UniCredit Bulbank, PR and Corporate Identity and Communication

Viktoria Blajeva, Phone No: 02/9264 993, Wjlj/ebwjepwbAvojdsfejuhspvq/ch

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