Assignment 4. Scan the text and unscramble the words in bold

by C.Giles, P.Garnham, K.Guha and R.Atkins

December 3, 2006

Currency markets will open on edge after last week’s sharp 1. lidecne in the dollar, with traders looking to new economic data and the tone from the European Central Bank (ECB) for fresh reasons to trade on the dollar.

The latest 2. toub of dollar weakness has occurred as currency markets have developed a growing belief that the US economy is in worse shape than the Federal Reserve claims. They have also been encouraged to buy the euro by the lack of concern expressed so far by ECB officials about the rise of the single currency.

On a 3. deatr-ghtedwei sisab, the dollar has declined nearly 4% since the middle of October, with more than half that fall being recorded since November 20.

The ECB will this week be watched closely for clues about future 4. eunerozo interest rates. Financial markets will scrutinize carefully the words of Jean-Claude Trichet, ECB president, for signals on the pace of increases in 2007 and any signs of concern on the currency. Some analysts think Mr Trichet may seek to create more room for manoeuvre on the timing of future moves, increasing the risks for traders purchasing euros.

The most important release of economic data will be the US employment report on Friday. The US labour market has held up strongly despite declines in the housing market and in survey data, and has helped to 5. unpinder official beliefs that the US economy is still set for a soft landing.

Fed officials have long been puzzled by the market’s confidence that the next move in rates will be down, that rates will be cut soon, and that this rate cut will be the first in a series. Fed policymakers see this as a 6. usiplable oirscena, but are more minded than the market to put weight on other possible scenarios.

Some traders are sticking to the view that the Fed sets rates and so should be listened to more closely. Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said the currency markets were too 7. elkfic. “In the battle for control of US monetary policy, we suggest betting on the Fed.”

But many investors are showing a growing desire to ignore Fed comments. Adrian Schmidt, senior forex strategist at Royal Bank of Scotland, said: “Under normal circumstances, hawkish comments from the Fed would have helped the dollar… Until financial markets start to pay more attention to the idea the Fed is unlikely to 8. tuc setar next year, the dollar is likely to remain under pressure.”

(Source: http://www.ft.com)

Assignment 5. Enumerate the factors that can influence the value of a currency in the Forex market.