The yuan has softened as a result, with last month's fall being the worst performance it has seen for five years.
Australia has been helped by surprisingly good growth figures posted this month.
"The Aussie dollar is more tied to China than anybody else's currency," says Jeremy Cook of World First, "and will remain so as long as China maintains its position as the manufacturing powerhouse it has become.
"However all these currencies are influenced by China. As China's factories slow, so does their appetite for raw material imports and this hurts the Australian economy and all the rest. Without growth these currencies will remain unloved."
These Antipodean currencies, along with Canada, are seen as commodity currencies as most of their output comes from mining of various resources including gold, minerals and oil along with soft commodities such as wheat and wool.
They've been booming since the turn of the century but this year has been rough on them, offering some desperately needed respite to expats relying on an income in sterling. It's not just China which is cooling down, India too has seen the brakes put on its booming expansion. And, of course, Europe is still one of their main trading partners.
Unlike the UK and much of Europe, they have plenty of options to ease the situation. One possible solution, if the politicians are anxious to boost their exchange rate and attract investors, is to increase the interest rate.
Josh Ferry Woodard of TorFX believes that both Canada and South Africa could hike their rates this year which will strengthen their currency. Meanwhile, Canada's poor domestic output for the first three months of the year dealt a severe blow to optimism surrounding the Loonie.
He says: "With 18-month highs in sight, the pound has been performing better against the Canadian dollar, in relative terms, than any of the other major currencies.
"There is a possibility that the damage done to the South African economy as a result of the euro crisis could in fact lead to an interest rate increase later on in the year to combat domestic inflation which could actually prove to be the catalyst towards a stronger rand."
One of the biggest winners in the currency wars at the moment is the US dollar. Unless they're earning in dollars, expats living in the States will be suffering as the pound has fallen back to within touching distance of 2010's two-year low.
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Green makes pledge to Rangers fans: I will not abuse your money in takeover - Daily Mail
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Pledge: Prospective Rangers buyer Charles Green
Charles Green has told Rangers fans he will not 'abuse' their money and insists he will not use cash from season ticket sales to fund his takeover.
The former Sheffield United chief executive - who is leading the consortium in place to buy the administration-hit club - was responding to comments made by Ibrox director Dave King.
King urged fans to reject the Company Voluntary Arrangement (CVA), which will be voted on by creditors next Thursday, while calling on supporters not to renew their season tickets until Green reveals the details of his plans.
Craig Whyte completed his own takeover of Sir David Murray's majority shareholding last May with money from the sale of future season ticket income to investment firm Ticketus.
Green told Rangers' official website on Friday night: 'On the basis the receiver is already holding cash and we haven't put the season tickets up for sale yet, I struggle to see how I can use season ticket money to buy the club.
'The season ticket renewal letters are actually going out today and I have already deposited money with the administrator to buy the club.
'We have provided the money to buy the club and we have documented the fact we are going to raise another 20-30million on top of that.
'The important thing - which is in the letter I've sent out to fans - is that season ticket money, when it comes in, will actually be sat in an account specifically to hold it there.
Takeover turmoil: Rangers future hangs in the balance
'For legal reasons, there is a 28-day cooling period after next Thursday should the CVA go ahead.
'Until that period ends, any monies that come into the club are held in a secure account and I have no access to that money.
'The season ticket money is crucial. The very suggestion we would be using it to buy the club is ridiculously untrue.
'The more season tickets any club sells, the more that can be invested back into the club and into players.
'If we are looking and speaking to the real, true Rangers fans, I'd say to them if there was ever a time to support the club it is now.
'They will know for the first time in many, many years that their money will not be abused the way it was before.'
Green is adamant his consortium will complete its purchase of Rangers, whether the CVA is accepted or whether the club has to opt for a newco route instead.
He added: 'We said from day one that our intentions were to acquire Rangers and the CVA was always the preferred option.
'I have no control over that. Only creditors have and next Thursday there will be a meeting and either the CVA will go ahead or it will be rejected.
'If it is rejected, we will immediately default into a newco route.
'There is nothing anyone can say on the outside to change the fact my consortium will acquire the business next Thursday.'
Green says King's comments were 'disruptive' at a time when he is attempting to gain the trust of a disillusioned Rangers support.
He said: 'Dave is someone I've never met but I contacted him last Friday in South Africa and we had a conversation.
'I sent him a copy of the presentation we've made public to tell him what our vision was. He owns 5% of the club and I felt it was important he had a chance to buy into it.
'I was expecting some reply but clearly the comments he made were outrageous and I'm disappointed.
'I have great difficulty where someone purports to be acting in the best interests of the club then recommends creditors should vote down a CVA. That is exactly what the club doesn't want.
'Real fans want to keep the tradition but what Dave King is saying is that the history and tradition of Rangers is of no consequence.
'It's not helpful to hear his thoughts and I think it is disruptive because the fans are getting mixed messages.
'We've said consistently because of what has happened historically at the club that there's a lack of trust and we have taken that on board.
'I understand the nervousness of fans, particularly after the issues of the last few years, but my upbringing was to treat someone as you find them and we've not let anyone down.'
However, he did agree with King's claim that Green - like Whyte - will not last a year at Ibrox.
He added: 'He's absolutely right on that because the minute I finish doing my job here I will leave the club.
'My job is to remove the debts, get Rangers on a sound footing and put 20-30million in the bank. Once that is done, I'm of no use to the club at all.'
Why Money Market Funds Break The Buck - Yahoo Finance
Money market funds are often thought of as cash and a safe place to park money that isn't invested elsewhere. Investing in a money market fund is a low-risk, low-return investment in a pool of very secure, very liquid, short-term debt instruments. In fact, many brokerage accounts sweep cash into money market funds as a default holding investment until the funds can be invested elsewhere.
SEE: Money Market
Money market funds seek stability and security with the goal of never losing money and keeping net asset value (NAV) at $1. This one-buck NAV baseline gives rise to the phrase "break the buck," meaning that if the value falls below the $1 NAV level, some of the original investment is gone and investors will lose money.
This only happens very rarely, but because money market funds are not FDIC-insured, they can lose money. Find out how this happens and what you can do to keep your "risk-free" assets truly risk free
Insecurity in the Market
Even though investors are typically aware that money market funds are not as safe as a savings account in a bank, they treat them as such because, as their track record shows, they are very close. But given the rocky market events of 2008, many did wonder if their money market funds would break the buck.
In the history of the money market, dating back to 1971, there was only one fund that broke the buck until the 2008 financial crisis. In 1994, a small money market fund that invested in adjustable-rate securities got caught when interest rates increased and paid out only 96 cents for every dollar invested. But as this was an institutional fund, no individual investor lost money, and 37 years passed without a single individual investor losing a cent.
In 2008 however, the day after Lehman Brothers Holdings Inc. filed for bankruptcy, one money market fund fell to 97 cents after writing off the debt it owned that was issued by Lehman. This created the potential for a bank run in money markets as there was fear that more funds would break the buck.
Shortly thereafter, another fund announced that it was liquidating due to redemptions, but the next day the United States Treasury announced a program to insure the holdings of publicly offered money market funds so that should a covered fund break the buck, investors would be protected to $1 NAV.
Track Record of Safety
There are three main reasons that money market funds have a safe track record.
- The maturity of the debt in the portfolio is short-term (397 days or less), with a weighted average portfolio maturity of 90 days or less. This allows portfolio managers to quickly adjust to a changing interest rate environment, thereby reducing risk.
- The credit quality of the debt is limited to the highest credit quality, typically 'AAA' rated debt. Money market funds can't invest more than 5% with any one issuer, except the government, so they diversify the risk that a credit downgrade will impact the overall fund.
- The participants in the market are large professional institutions that have their reputations riding on the ability to keep NAV above $1. With only the very rare case of a fund breaking the buck, no firm wants to be singled out for this type of loss. If this were to happen, it would be devastating to the overall firm and shake the confidence of all its investors, even the ones that weren't impacted. Firms will do just about anything to avoid breaking the buck, and that adds to the safety for investors.
Although the risks are generally very low, events can put pressure on a money market fund. For example, there can be sudden shifts in interest rates, major credit quality downgrades for multiple firms and/or increased redemptions that weren't anticipated. Another potential issue could occur if the fed funds rate drops below the expense ratio of the fund, which may produce a loss to the fund's investors.
To reduce the risks and better protect themselves, investors should consider the following:
- Review what the fund is holding. If you don't understand what you are getting into, then look for another fund.
- Keep in mind that return is tied to risk - the highest return will typically be the most risky. One way to increase return without increasing risk is to look for funds with lower fees. The lower fee will allow for a potentially higher return without additional risk.
- Major firms are typically better funded and will be able to withstand short-term volatility better than smaller firms. In some cases, fund companies will cover losses in a fund to make sure that it doesn't break the buck. All things being equal, larger is safer.
Money market funds are sometimes called "money funds" or "money market mutual funds," but should not be confused with the similar sounding money market deposit accounts offered by banks in the U.S.
The major difference is that money market funds are assets held by a brokerage, or possibly a bank, whereas money market deposit accounts are liabilities for a bank, which can invest the money at its discretion - and potentially in (riskier) investments other than money market securities. In a money market fund, investors are buying securities and the brokerage is holding them. In a money market deposit account, investors are depositing money in the bank and the bank is investing it for itself and paying the investor the agreed-upon return.
If a bank can invest the funds at higher rates than it pays on the money market deposit account, it makes a profit. Money market deposit accounts offered by banks are FDIC insured, so they are safer than money market funds. They often provide a higher yield than a passbook savings account and can be competitive with money market funds, but may have limited transactions or minimum balance requirements.
The Bottom Line
Prior to the 2008 financial crisis, only one small institution fund broke the buck in the preceding 37 years. During the 2008 financial crisis, the U.S. government stepped in and offered to insure any money market fund, giving rise to the expectation that it would do so again if another such calamity were to occur. It's easy to conclude then that money market funds are very safe and a good option for an investor that wants a higher return than a bank account can provide, and an easy place to allocate cash awaiting future investment with a high level of liquidity. Although it's extremely unlikely that your money market fund will break the buck, it's a possibility that shouldn't be dismissed when the right conditions arise.
More From Investopedia
Forex: EUR/HUF up after data in Hungary - FXStreet.com
FOREX-Euro falls vs dollar as Spain concerns mount - Reuters
* Euro retreats after Spanish rating downgrade
* Lacklustre Italian, German economic data adds to gloom
* Lack of policy action from Fed hits riskier currencies
By Nia Williams
LONDON, June 8 (Reuters) - The euro fell against the dollar and yen on Friday after a Spanish credit rating downgrade added to investor reluctance to take on risk and ratcheted up concern the European debt crisis was intensifying.
European Union and German sources told Reuters Spain was expected to make a request over the weekend for an aid package to prop up its troubled banks, highlighting the vulnerability of the country's financial sector.
Perceived riskier currencies were also under pressure after U.S. Federal Reserve Chairman Ben Bernanke offered no hints of imminent monetary stimulus in his testimony to Congress on Thursday, wrongfooting some market players who had positioned for a dovish statement.
The euro fell 0.75 percent to $1.2461, retreating from a two-week high of $1.2625 hit on Thursday after a surprise interest rate cut by the Chinese central bank.
Technical charts showed the euro was vulnerable to a test of the 23-month low of $1.2288 hit on June 1, after failing to break support-turned-resistance at $1.2626, the January low.
"With the negative news on Spain's rating cut it's back to reality for the market. The recovery we saw in the last few days was not a sustainable one," said Lutz Karpowitz, currency strategist at Commerzbank, who forecast the euro would be around $1.20 by the end of June.
Rating agency Fitch slashed Spain's credit rating by three notches on Thursday, signalling further downgrades could come as the country tries to restructure its troubled banking system.
The euro also took a knock after Italian industrial production fell far more than expected in April and German imports tumbled at their fastest rate in two years in April, adding to concerns of the euro zone slipping into recession.
FED HOLDS FIRE
Riskier currencies pared gains against the dollar made earlier in the week when investors sold safe-haven currencies on speculation central banks could signal further monetary easing to support growth.
Bernanke told Congress the Fed was closely monitoring "significant risks" to the U.S. recovery from Europe's debt crisis, disappointing those looking for him to lay out the groundwork for a third round of large-scale Fed bond buying.
The dollar index rose 0.9 percent to 82.771, recovering from a 10-day low of 81.911 hit on Thursday. The Australian dollar slipped 0.7 percent against the U.S. currency to US$0.9828.
Traders also cited talk that Chinese economic data due at the weekend could be weak and that Beijing's easing might have been aimed at pre-empting the grim news.
"Some people had high expectations of Bernanke, which he didn't match. The shock would have been much larger if it had not been for the Chinese rate cut," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.
The euro fell 1.2 percent against the yen to 98.80 yen. The safe-haven Japanese currency gained broadly as market sentiment soured, with the dollar falling 0.5 percent to 79.22 yen.
Many analysts said the euro could come under further pressure next week as attention refocuses on political turmoil in Greece before an election on June 17. A victory for anti-bailout parties would raise the possibility of Greece leaving the currency union.
Of course he's going to 'say' that. The plan is to get the money, put it in another account, show possible investors that there is a few bob in the kitty in an attempt to have them put in money he can actually use... Its Murray all over again, borrow from Peter, to Pay Paul only this time use the fans and their cash as the bait to reel in the big fish to line his pockets.. Sniff, Sniff. Ooh er, bit fishy mate.
- Byron, Livingston, Scotland, 08/6/2012 23:03
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