Posts Tagged yen
Who Can Print More Money — FED or BoJ?
Posted by Oksana Grebenjuk in Currency on Ноябрь 8th, 2010
Not that long ago central banks were in a race who can slash interest rates to zero first. Seems like a distant memory, but the Bank of Japan was the winner then. Now a new competition is shaping up – who can print more (funny) money. So far the FED is leading, after revealing details of the next round of QE. This time it is $600 billion, about a $100 billion more than had been previously hinted. On balance, though, it is not much of a difference. At this stage of the game, what is $100 billion, really? FED does not have neither amount and must create the money with a few keystrokes, otherwise known as «printing».
In response, the Bank of Japan announced own scheme of easing. It is smaller, at about $62 billion, but it can always be increased. However, the BoJ plans to spend it in other ways than its US counterpart. It is getting even more adventurous. Instead of simply buying bonds, the BoJ also wants to purchase Japanese real-estate investment trusts, ETF’s tracking Nikkei 225 and Topix, as well as corporate debt. Looks like weakening the Yen is not the only objective, but the central bank is also engaging in «pumping» the domestic stock market.
All moves by the FED are being mimmicked by the BoJ. To a smaller degree for now, but they are likely to increase the buying spree soon. Most would argue that so far all those efforts had no impact on the Yen. Perhaps, but while the JPY has not reversed against the Dollar, it became, for all practical purposes, pegged to the USD. Over the last three weeks, the USD-JPY has been trading in a 200 pips range in a situation similar to 2004, when it was stuck at just above 100 level. This can easily last for few more weeks, or months, until one of the central banks eventually prints enough money to completely degrade its currency. At that time we will have a dubious winner of this competition. Read the rest of this entry »
Currency War: “The Worst of Wars”
Posted by Oksana Grebenjuk in Budget on Ноябрь 1st, 2010
The United States is the lead negotiator in trying to convince China to revalue its undervalued yuan. But U.S. officials are simultaneously operating under the growing perception that it may be seeking a weaker currency of its own — by planning for another round of quantitative easing — thereby threatening its credibility.
That’s why U.S. Treasury Secretary Tim Geithner made a strategic move to influence the G-20 agenda. He preceded the formal meetings last weekend with a letter to his G-20 counterparts, recommending a unified position and the language for G-20 opposition to the growing currency tensions in the world.
And for the most part, it worked.
Here’s the key take-away from the final G-20 communiqué and what it could mean for the direction of markets …
First, the communiqué said that they «met with a sense of urgency.» In fact, an ECB policymaker later called the dangerous currency wars «the worst of wars, because at the end there is no winner.»
This is significant …
The last time they made such a statement of urgency was when the euro was on the edge of a cliff. It coincidently bottomed the first trading day after meetings concluded. Read the rest of this entry »
The Dollar Is A Third-Rate Currency
Posted by Oksana Grebenjuk in Currency on Октябрь 25th, 2010
To many investors’ surprise, the Yankee dollar’s earned only a third-place ribbon for its depreciation against gold over the past 12 months.
With all the recent hoopla and headlines about gold making new highs against the greenback, the destruction derby of the world’s reserve currencies is actually won by the euro, with sterling close behind.
Over the past year, the U.S. dollar lost 29.8 percent vs. bullion compared with a 39.7 percent tumble for the European common currency and a 34.5 percent decline in the British pound. Bringing up the rear is the Swiss franc, with a 23.1 percent loss, and the Japanese yen, which gave up 16.4 percent to gold.
Oddly enough, the U.S. dollar’s the least volatile reserve currency when it comes to bullion purchasing power. Its standard deviation is just 15.3 percent over the past year. This may not seem like a testament to the Fed’s steady hand on the nation’s economic tiller, but it’s something. It actually bespeaks the wait-and-see attitude of the central bank after last year’s stimulus and accommodation.
The likelihood of Fed intervention increases when commodity prices—a basic metric of inflation—rise or fall significantly compared with Treasury securities. In the chart below, the red Fed Indicator line dances within a neutral zone—a condition that compels the central bank to watch, but not act. A sustained move in the indicator above the upper band would signal an increased likelihood of accommodation—or lower money rates and a weaker dollar. A dip below the lower band flashes a higher probability of tightening, or higher rates and a stronger dollar. Read the rest of this entry »
Yen falls as BoJ surprises markets with rate cut
Posted by Oksana Grebenjuk in Currency on Октябрь 7th, 2010
The Bank of Japan (BoJ) surprised financial markets on Tuesday by cutting policy rates to zero and announcing an emergency 35 trillion yen monetary easing program.
Announcing a comprehensive monetary easing policy at the end of its two-day Monetary Policy Meeting on Tuesday, BoJ stated clearly it is pursuing the virtually zero interest rate policy and that it will maintain the policy until it is convinced that price stability is in sight.
A BoJ statement said the central bank will «encourage the uncollateralized overnight call rate to remain at around 0 to 0.1 percent, effective immediately.»
As part of further monetary easing, the central bank said it will add 30 trillion yen lending facility to provide banks with cheap loans. The central bank also said it was setting up a temporary 5 trillion yen ($60 billion) fund to buy Japanese government bonds, short-term government securities, commercial papers and corporate bonds.
The decision to lower the policy interest rate was unanimous. Read the rest of this entry »
Japanese export growth slows again in August
Posted by Oksana Grebenjuk in Trading Markets on Сентябрь 28th, 2010
Japan’s growth in exports slowed for a sixth consecutive month in August, another signal that the nation’s economic recovery is running out of gas, while the yen remains at a persistent 15-year high against the dollar.
Exports climbed 15.8 percent on an annual basis, compared with a peak 45.3 percent surge in February.
The slowdown in exports comes amidst moves by the Bank of Japan to intervene to soften the strengthening yen, while a political dispute with China keeps growing.
Exports to other Asian countries, which represent for more than half of Japan’s total export business, rose 18.6 percent, significantly slower than the 23.8 percent increase in July.
Exports to China grew by 18.5 percent in August, down from a 22.7 percent annual increase in July.
Meanwhile, Japanese exports to the U.S. rose by 8.8 percent from a year earlier, far below the 25.9 percent climb recorded in July. Read the rest of this entry »
Commodity-Linked Currencies Suffer Huge Losses
Posted by Oksana Grebenjuk in Currency, Favourites on Июнь 7th, 2010
The weaker-than-expected U.S. employment report helped trigger a flight-to-safety rally in the Dollar while driving investors out of commodity-linked currencies. Aversion to risk weakened U.S. equity and global commodity markets, helping to drive up demand for the lower-yielding Japanese Yen. All three major commodity-linked currencies – Australian Dollar, New Zealand Dollar and Canadian Dollar – suffered huge losses, leading to speculation that this trend is likely to continue next week.
The U.S. Dollar Index made a new high for the year, boosted by the sharp sell-offs in the Euro, British Pound and the commodity-linked currencies. Gains were limited slightly by the rise in the lower-yielding Japanese Yen.
The initial catalyst behind the U.S. Dollar’s rise on Friday was the news that Hungary is in the midst of a fiscal crisis of its own. This news caught many traders by surprise because most were focused on the upcoming U.S. Jobs Data Report. After the first thrust to the upside, gains were extended when the government reported that the number of jobs created during May fell far below the consensus.
Economist estimates were for an increase of about 513,000 new jobs. The U.S. Labor Department reported an actual increase of 431,000. This news was bearish in itself, but the traders were really surprised when the internals of the report showed that of the 431,000 new positions, 411,000 jobs were created by the U.S. government. This figure was primarily made up of short-term census workers. Read the rest of this entry »
Greek uncertainty hurts euro
Posted by Oksana Grebenjuk in Currency on Апрель 27th, 2010
Confusion about the timing and amount of emergency aid for Greece prompted investors to sell the euro on Monday as markets worried whether the euro zone country will manage to avert a debt default.
The euro dipped briefly below $1.33, falling against the greenback for the seventh trading session in the last eight. It also hit a three-month low against sterling on investor concern about potential conditions attached to a loan for Greece.
The Federal Reserve’s policy meeting this week drew renewed attention to when the U.S. central bank will likely begin raising interest rates. The dollar rose above 94 yen as investors bet the Fed would raise rates before year end, well ahead of any move by the Bank of Japan.
Confusion over aid for debt-stricken Greece arose on Monday after German Chancellor Angela Merkel said the euro zone member, which on Friday had requested emergency aid, must commit to further savings measures and show it can return to a sustainable economic path before Germany can approve aid.
Greece had tried to reassure investors over the weekend that the 45 billion euros ($60.5 billion) in aid from the European Union and the International Monetary Fund would arrive in time to avert the euro zone’s first sovereign default. Read the rest of this entry »
US Dollar Likely to Continue Upward Swing This Week
Posted by Oksana Grebenjuk in Currency on Декабрь 21st, 2009
The dollar is likely to extend gains in the upcoming week, continuing to draw support from growing signs of a stable U.S. recovery as well as a Federal Reserve plan to wind down most of its emergency lending early next year.
Both factors have pushed the market’s U.S. interest rate expectations forward despite pronouncements from the Fed that it will keep interest rates low for an extended period.
The rate futures market Friday has priced in at least one quarter-point rate increase by the beginning of the second half next year. A few months ago, futures traders had factored in Fed tightening late in 2010.
«We see the U.S. economy continuing to recover and monetary policy settings starting to move back to normal,» said Nick Bennenbroek, head of FX strategy at Wells Fargo in New York.
«Although our economics team does not expect actual rate tightening to take place until late in 2010, the withdrawal of non-conventional measures could start tipping the scales in the dollar’s favor,» he added. Read the rest of this entry »
Euro Advances Against Yen, Dollar on Signs of Economic Recovery
Posted by Oksana Grebenjuk in Currency, Favourites on Ноябрь 2nd, 2009
The euro rose against the yen and the dollar as signs the global economy is recovering trimmed demand for the relative safety of the U.S. and Japanese currencies.
The Australian dollar climbed against all 16 most-traded currencies as Treasurer Wayne Swan said economic growth will be faster than expected and a government report showed house price increases accelerated. Japan’s currency earlier rose to the strongest level in three weeks against the dollar and the euro after New York-based CIT Group Inc. filed for bankruptcy.
“Global data still suggest that the economy is on the mend,” said Minoru Shioiri, chief manager of foreign exchange trading at Mitsubishi UFJ Securities Co. “The underlying need to invest in higher-yielding currencies through carry trades remains intact.”
The euro earlier fell to 131.01 yen, the least since Oct. 9, before trading at 132.91 as of 7:34 a.m. in London from 132.61 in New York on Oct. 30. The yen was little changed at 90.12 per dollar, after touching 89.20, the strongest level since Oct. 14.
Japan’s currency slid to 81.47 per Australian dollar from 81.05 last week, after rising to 79.47, the most since Oct. 8. Australia’s currency fetched 90.42 U.S. cents from 89.97 cents. New Zealand’s dollar was at 72.02 U.S. cents from 71.81 cents last week. Read the rest of this entry »
Stocks, Oil, Metals Drop on Economy Concern; Yen, Dollar Gain
Posted by Oksana Grebenjuk in Favourites, Fund Markets on Июль 6th, 2009
Stocks fell, pushing the MSCI World Index lower for a third day, and oil and industrial metals retreated on concern the global economic recovery is faltering.
The MSCI World Index of 23 developed countries slipped 0.8 percent at 10:15 a.m. in London, extending its decline since reaching a high for the year on June 2 to more than 6 percent. Germany’s DAX Index retreated, bringing its drop from its 2009 high to 10 percent, the common definition of a correction. Nickel decreased for a third day on the London Metal Exchange, while oil slumped to its lowest level in five weeks. The yen rose against all 16 most-traded currencies tracked by Bloomberg.
Stocks tumbled, with Standard & Poor’s 500 Index futures declining by 0.9 percent, before the U.S. earnings season begins with Alcoa Inc.’s results on July 8. Profits at S&P 500 companies dropped last quarter and will also contract in the three months ending in September, extending the stretch of declines to a record nine quarters, according to analysts’ estimates compiled by Bloomberg. The Institute for Supply Management’s index today may show U.S. service industries contracted for a ninth straight month in June.
“The reassessment of the global economic outlook is likely to continue this week,” a team of Citigroup Inc. strategists, including Todd Elmer in New York, wrote in a research report today. “As a result, an extension of the recent bout of risk aversion may lie in store.” Read the rest of this entry »
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