Dollar ends weak on strong note as market news disappoints

the US dollar ended the week as the strongest of the majors largely due to increased risk aversion following the release of the disappointing market news.

Euro- the euro has a volatile week with a host of economic reports being released. However it ended the week almost unchanged from its usual range against the dollar. Forex options market showed that volatility expectations remained high ahead of ECB interest rate decision and the us nonfarm pay roll report, but sharp moves after the reports were incapable of pushing the euro below the 1.40 mark. The ECB had come under pressure to cut further rates with the organisation of economic corporation and development (OEDC) urging the bank to cut rates towards Zero, and to hold them at those levels going to 2010. However rates were left unchanged for the time being. Euro Zone confidence improved for the third month in June, but the European commission warned that problems still persists.

Sterling- sterling fell signficantly during the week from a high of 1.6746 as an increase in risk aversion and news that the first quarter GDP contraction was larger than expected at 2.4% its lower level since 1970's. Year on year GDP growth was revised down -4.9% , the lowest rate since record keeping begin in 1956. Dismal reports from the US also added to the bearing sentiments and spaked risk aversion. Sterling shot higher to start the week after showed house prices gained 0.9% in june, sparking hope that housing sector stablisation lead the way to a recovery range for this week($1.6299-$1.6744)

Yen- The japanese yen may continue strengthen against its major counterpart over the following week as market players curb their appetite for higher risk and the low yeilding currency should benefit from safe haven flows as investor weigh the outlook for global economic recovery. Data released last month showed that the tanka index of japanese sentiments rose from a reading of -58 in march to -48 in june. The index is widely followed because it is fairly correlated with Japanese GDP.

Data also suggested that economy has bound with industrial production rising for the third consecutive month in may while it is still down 30% relative to last year. production rose more than 14% from its all time low last February. Range this week( Yen 95.13- Yen 96.99

What it means to invest in equities

The past year has not been easy for the average investor. Capital markets plunged to all time low, fundamentally healthy stocks(stocks of companies having sound financial health and good business prospects)lost a significant portion of their value,mainly driven by erosion of investor confidence and triggered by negative market sentiment.

The Dubai financial market(DFM) that once rose to a high of over 8000 points has now dropped to around 1,600points and has been around this level for a few months.

Investors started focusing more on preserving their wealth rather than making more out of it. Simply put investors did not want to lose any more of their hard earned money in an attempt to make more. But one cannot remain passive for long and markets do not stagnate at their bottoms. Holding cash yield almost nothing after adjusting for inflation. And moreover, one needs to invest for the future and that is where capital markets more specifically,the equity markets play a crucial role

But what buy equities?

Equity,shares or stock all means the same thing. Equity represents a share in the ownership of a company.It represents a claim on company'sassets and earnings. The owernship stake in the company increase as one aquire more equity. when you buy a share of a company its ownership entiles you to the profits of the company in the form of dividents and other benefits.

But we should bear one thing in our mind that investment world and equity investment do come with certain degree of risks. so, before investing in equity investor has to check risk or profit.In other words if you are capable of taking risks the world of equity investments beackons you.

The next important thing is "how much to invest in equities?

The rule of the thumb is "hundred minus age". So if you are 30, you need to put 70% of your investment in equities and vice-versa. The rational behind it is simple.

Risk bearing capacity and risk tolerance comes in the young age and moreover it provides many more years to recover your fallen fortunes in case the market behaved opposed to your expections.

Another aspect of equity or investment is the way one finance it. No matter how exiciting and buoyant the stock market is you should never stretch borrowing to invest in their asset class. Investment in shares are in essence investment in business of the company and companies provide substantial returns in the long run. So, shares are long term investements that should never be financed by long term borrowing.

The trick to analyse stock for the longer term by way of fundamental analysis. Companies with healthy cash flows,substantial earning, good business prospects, growth potential sound corporate governance and enjoying investor confidence are the one to look out for.

There are various ways to analyse such companies.The popular among them are analysing the key ratios of the company.These key ratios are available in respectable stock exchange website.

The other way to analyse stock is reading charts and graphs. This approach is more directed towards understanding the short term movements that are not fundamental in nature.

European central bank urges cautions as unemployment worsens

us employers cut more jobs than expected in june pushing jobless rate to a 26 year peak and unemployement in Europe hit a 10year high, dampening hopes of a quick recovery from recession. Ecb chief warned that although the downturn had eased, weak economic activity would hamper growth for the rest of the year and only a gradual recovery would emerge by mid 2010.

Data showed that US lost 467,000 jobs in june, more than 100,000 greater than expected by economist breaking a four trend of moderation in job losses.The unemployment rate rose to 9.5% the highest since a matching jobless rate in Aug-1983

"It looks like the economy was still losing substantial momento as the secondquarter came to a close. This report is weak across the board." Said william sullivan , chief economist at JVB financial group in Florida.

unemlopyment is emerging as the biggest challenge to recovery which govts. around the world are trying to stroke with record low interest rates and by pumping trillion of dollars into their economies.

In Europe Central bank president Claude cautioned about economic growth after the ECB left rates at 1% record low. Economic activity over the remainder of this year is expected to remain weak but should decline less strongly than was the case in the first quarter in 2009. He said " The jobless rate in the 16 nation euro-zone area rose to 9.5%, the highest since 1999 data showed.