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There were much news hitting the forex market today, making currencies rise and fall. The day started with reports that the U.S. economy grew less last month than expected, increasing demand for the U.S. dollar as it is always considered a safe asset. However, both China and Germany announced positive reports, where business confidence grew in Germany and manufacturing increased in China. This news offset the bad news, making the euro, other currencies, commodities and stocks rally.

Gold, silver and oil has been some of the winners the past couple of hours, where gold performed best with 0.3 percent appreciation, 0.1 percent more than silver. The euro managed to advance 0.4 percent against the U.S. dollar, breaching the $1.30 level. Right now, investors are looking positive and markets bullish.

A lot of currencies dropped in the forex market today along with other assets, such as stocks and commodities. European leaders are getting ready to meet in Brussels today and investors are currently speculating on the outcome of the meeting and how markets will response. Most bets are that the summit will not present any new course of action, which might mean that the global economy will continue to look weak during 2012 and 2013. These speculations made commodity prices and stock prices fall, which in turn led to several currencies depreciating.

Two currencies affected were the Australian dollar and New Zealand dollar. Both these countries rely much on commodity exports, which means that they are dependent on the health of the global economy. A slow-down will in turn mean less exports and less income. As a result of commodity prices falling, so did the Australian and New Zealand currencies.

The Australian dollar fell 70 basis points against both the U.S. dollar and Japanese yen. The New Zealand currency fell half a percentage, 50 basis points, against both the U.S. and Japanese currencies.

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Unlike other currencies, the Australian and New Zealand dollars continued to gain in the forex market today. The currencies started of the week with gains, together with stock markets and other riskier assets. However, both of them depreciated yesterday on bad domestic reports. Today, the tides turned once again, increasing the demand for both the Australian dollar and New Zealand dollar.

The main reason behind the gains today were results in European bond sales, mainly concerning France and Spain, who both suffered lower credit ratings about a week ago. It turned out that these countries found it easy to raise capital and sell bonds, even at lower yields then previous auctions. This signaled that the Europeans are heading for a recovery period, investors are confidently buying bonds without expecting higher yields as risk compensation.

There were also other financial markets gaining from the European news, mainly Asian stock markets, which continued to rise today.

The euro maintained its hot streak from yesterday as it continued to gain against major forex pairs. Today, the euro strengthened 0.7 percent against both the Japanese yen and the U.S. dollar, 0.2 percent higher than yesterday’s appreciation.

Yesterday, there were several factors contributing to the winning streak of the euro. Once again, the major factors behind today’s appreciation were both news and rumors. The rumor is that the IMF are willing to add additional funds to aid Europe in their efforts to solve their debt crisis, which naturally had a positive effect on the value of the euro. The news announced is that the United States, once again, are showing strong signs of an intact economy ready to fight anybody claiming that the country is in a deep recession. Total output in manufacturing increased by 40 basis points in the U.S., which was higher than analysts had predicted. Furthermore, fresh numbers showed that the number of new houses is increasing at the fastest pace in almost four years.

When the U.S. performs as they have recently, optimism increases, creating demand for risky assets. That is why investors tend to go short on U.S. dollars and long on currencies such as the euro.

The South African economy has been noted as stable for a long while by several rating agencies. Today, Standard & Poor’s decided to downgrade the African economy from stable to a negative outlook. The news made the South African currency fall more than it has the past four weeks against the U.S. dollar.

Just before the news, the South African rand was looking strong due to solid numbers presented by the U.S. economy. The United States was growing, which increased optimism in the forex market. The commodities market also witnessed higher prices due to increased demand. However, the rand managed to depreciate 130 basis points as the announcement officially was made by Standard & Poor’s.

The rating agency’s main critique to the South African economy is that it is too dependent on raw material exports and that the country does not manage to create enough jobs for its population. Trading reports showed that investors fled from the South African currency as soon as the surprising news hit the forex market.

The European region is still struggling to maintain the health of their common currency, the euro, in the forex market. Several countries in the currency union have troubling balance sheets and large budget deficits. In order to make sure they get their balances in order, some of them are forced to raise taxes and cut public spending. This is proving to be a problem for Europe, as the region might be heading for a recession. Instead of focusing on economic stimulation through spending packages, focus has shifted to stricter fiscal policies.

As a result of liquidity problems in the European region, countries are forced to compete over lenders money. This is a reason for why yields on several government bonds have reached record levels, in orders to attract investors some countries are forced to pay high yields as a compensation for higher levels of risk.

European officials are set to meet again in five days as a follow up to the summit held in late December. Expectations are high, though they have been damped by several statements made by Germany’s Angela Merkel stating that there is no quick solution for the current debt crisis and that Europe will face a very tough year.

The Canadian currency experienced volatility in 2011 as the year was full of uncertainties and setbacks for the global economy. As we take a look at the full year, the Canadian dollar actually traded stronger against the U.S. dollar on average than it has in the last 30 years.

The average level the Canadian dollar traded against the U.S. dollar was just under 99 Canadians cents, which is under parity, meaning that the Canadian currency actually was stronger than the U.S. currency.  The Canadian dollar also had its strongest year against the euro in 12 years.

Although the U.S. dollar and Japanese yen were considered the main safe heavens in the forex market, Canada managed to attract a lot of investors by maintaining its triple A rating.

The Australian currency weakened against all major currencies except the euro today. The main domestic reason behind the Australian dollar’s latest dips in the forex market has been due to the lowering of interest rates carried out by the Reserve Bank of Australia.

The Australian dollar depreciated 0.7 percent against the U.S. dollar and half a percentage against the Japanese yen during todays trading session. Apart from local fiscal policies, the European debt crisis keeps hurting the Australian currency, as demand is uncertain and the cost of borrowed capital high.

Speculations are that Australia will keep lowering interest the coming year in order to stimulate the economy and achieve further economic growth.

Several Asian currencies witnessed gains in the forex market, as the U.S. economy showed figures of higher employment. A strong American economy means more economic growth in the Asian region, which is closely linked to western economies. The hope for a solid global economy also sparks interest in risky assets, which several Asian currencies have proved to be lately.

The Indian rupee is one of the biggest winners recently, gaining around 1.5 percent against the U.S. dollar.  The Philippe peso gained over 0.5 percent while the Chinese yuan and South Korean won gained just short of half a percentage.

Another currency appreciating was the Malaysian ringgit, which strengthened about 0.4 percent against the U.S. dollar. All these gains for Asian currencies are still comebacks from a bad-performing week, all currencies are still set for weekly declines against the greenback.

The South African rand fell 2 percent against the U.S. dollar today as the threat of a recession in the European region still concerns investors. The South African currency had already depreciated over half a percentage just last week.

South Africa’s main export is commodities, which have taken a big hit as the threat of an economic slow-down in the euro region remains. Around three fifths of the country’s total exports consists of commodities.

There are two main reasons behind the currency’s latest depreciation in the forex market. The first one is that a global economic downturn, or recession, will hurt the demand for commodities. This will include the demand for copper, which is a main commodity in South Africa, as the Chinese economy will grow in a slower pace. Furthermore, as the global economic outlook looks unsure, the demand for assets in emerging markets such as South Africa falls. Investors want to bet on safer assets if the future looks cloudy, which is negative for both the South African economy and currency.