JPY

A trans-Atlantic good-news story

Genuinely positive stories on the economic front are relatively rare these days, with no fewer than ten of the EU’s 27 economies in recession and Australia’s central bank forced to cut rates by 50bp yesterday in part because the non-mining economy is contracting. Thankfully, both Germany and America continue to defy the global gloom. In the US, the manufacturing sector is expanding at a respectable pace, propelled by solid growth of both domestic and export orders. Read more

02/05/2012 @ 07:42 GMT

Tokyo annoyed by new yen strength

Despite some aggressive easing measures undertaken over the past couple of months, Japanese policy-makers will no doubt be annoyed by the consistent strengthening of the currency. Overnight, USD/JPY fell to 79.64, a two-month low and just above the 100d moving average; back in mid-March, it was trading above 84.0. Read more

01/05/2012 @ 09:19 GMT

A lovely shiny pound

Of the major currencies it has been the proud pound that has been leading the way so far this year. Following yesterday’s less dovish MPC Minutes and the surprisingly strong employment figures, cable is back through 1.60 once more and EUR/GBP is at a 20mth low of 0.8180. Against the Japanese yen the pound has advanced by almost 10% so far this year. Read more

19/04/2012 @ 07:23 GMT

Yen softens amidst talk of more BoJ easing

Right on cue, BoJ Deputy Governor Nishimura has sent yen bulls scurrying for cover by suggesting that the Japanese central bank will be prepared to implement additional easing should it become necessary. With the next BoJ meeting just over a week away, many have understandably interpreted his remarks as a warning that the central bank is still disposed towards further measures, notwithstanding the bold announcements already made this year including the huge expansion of its asset-purchase program and the establishment of a 1% inflation target. Read more

18/04/2012 @ 08:28 GMT

The modest dollar adjustment

In the wake of the US jobs numbers on Friday, which saw the dollar softer as QE3 talk was once again re-ignited, the dollar has continued south, although only modestly so, the dollar index down around a further 0.2% in the aftermath of the release. In sum, the weaker headline payrolls data should be put in the context of what has been very strong labour market data over the past six months, above and beyond the messages from elsewhere in the economy. So if last week’s release went some way to narrowing this gap, perhaps that is not such a bad thing after all? Read more

10/04/2012 @ 07:34 GMT

That awful knocking noise

Since the commencement of the second quarter, there has been a noticeable shift in risk appetite, triggered no doubt by alarm that the major central banks may take away the punchbowl at some point. Read more

05/04/2012 @ 12:24 GMT

Rajoy’s fiscal high-wire act

Spain’s new government has announced spending cuts and tax increases worth an estimated EUR 27bn in an endeavour to reduce the gaping fiscal shortfall from 8.5% of GDP at the end of last year to 5.3% by December 31st. Most of the pain is being absorbed by departmental spending – all ministries are to reduce spending by 17%. In addition, power prices are to rise by 7% and the tariffs that electricity companies pay is to rise by 5%. Read more

02/04/2012 @ 07:14 GMT

Yen gains may prove temporary

In the run-up to the end of the financial year, the Japanese currency has strengthened slightly. USD/JPY, which ten days ago was threatening the 84.0 level, fell below 82.0 for a time overnight. Part of the explanation for the turnaround lies with profit-repatriation flows by Japanese companies that frequently occur around this time of the year. Also, interest rate differentials between the US and Japan are narrower, helped by Fed Chairman Bernanke’s recent remarks which scuppered talk of an early rate hike in the US. Read more

30/03/2012 @ 09:08 GMT

The yen and rates

Following on from its near 10% depreciation vs. the USD since the early part of February, the yen has been in a more consolidative mood of late, USD/JPY having failed to make a successful assault of the 2011 highs above the 85 level. One of the factors that accounts for this is the turn-around of US market rates, with the US 2Y having moved down from the push towards 40bp, to stand around the 33bp level. USD/JPY’s correlation with 2Y spreads (using swap rates) has increased through most of this year, currently near to -0.88 (on 1-mth rolling basis). Read more

29/03/2012 @ 10:14 GMT

The China factor

Throughout this week China has been a talking point for markets, acting as a cooling breeze on risk trades. Initially, it was reports from BHP of the prospect of softening iron ore demand, but it remains in focus thanks to the softening of the latest PMI data overnight, showing the manufacturing series down to 48.1, from 49.6. A China slowdown has been the dog that has not barked for some years now and China played a pivotal role in supporting the global economy through the 2008-09 slow-down. Read more

22/03/2012 @ 08:02 GMT

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