Euro makes gains as Gustav nears

The impending damage that Hurricane Gustav is expected to inflict on the Gulf of Mexico oil and gas fields has exerted an influence on the currency market this week, with the euro gaining on the dollar and the pound thanks to an increase in the price of crude oil in the face of the storm.

The euro also gained by added speculation in European markets that the European Central bank may be forced to raise interest rates as inflation threatens to rise in line with the cost of oil.
    
Euro inflation double the target

The Eurozone is already seeing inflation at double that of the Central Banks target, with figures at 4 percent against a target of 2 percent, a factor that will further influence the decision of the Central Bank with regard to interest rates.

The euro cost $1.4723 late this week on the New York exchange, and 80.49p on the London Exchange.

Australian and New Zealand dollars both saw a climb in strength against the US dollar, with the Australian dollar boosted by reports of increased investment in businesses in the Australian market.
    

Investment outstrips forecast in Australia

Investment has outstripped forecasts in Australia, with spending up by almost 6 percent in the second quarter of the year compared to first quarter figures, while the Reserve Bank of Australia is anticipated to be cutting interest rates in 2009, although by less than previous estimates had predicted.

An Australian dollar had a value of 86.44 cents late this week, and a New Zealand dollar 70.22 cents at the corresponding time.
    

Rand makes a stand in the market

Also strengthening in the face of the dollar was the rand, the South African currency helped by the rising prices in the current market of precious metals, particularly gold and platinum.

With the majority of the world platinum reserves on here soil, South Africa is always well placed to capitalise on any rise in the market, and the strength of the production capacity of platinum has meant a rise in the currency despite the high levels of inflation in the country.

The rand was worth $7.7085 against the US dollar, and R11.352 to the euro.

South Africa recorded a producer price inflation rate of almost 19 percent in July, an increase from just under 17 percent in June, while consumer inflation rose to 13 percent for July from 11.6 percent the month before.

This has not halted the strength of the rand.