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Daily Report

The JPY rose against the euro as Asian stocks plummeted on concern the global recession will be prolonged, spurring demand for the relative safety of Japan’s currency. The JPY gained against all 16 most-traded currencies before a U.S. report tomorrow that economists say will show durable-goods orders declined in May.

The Japanese currency also gained for a third day against the dollar after the World Bank yesterday forecast the global recession will be deeper than it earlier projected. “Worries that the ‘green shoots’ of the global recovery are unlikely to be sustainable may make investors risk averse,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “This will probably lead to yen strength.” The EUR/JPY is currently trading at 132.35 as of 9:00am, London Time.

Canada’s dollar the loonie fell against its U.S. counterpart on speculation recovery from the first global recession since World War II will take longer than some forecast. “There’s a little bit more focus on the fact that the green shoots are just that, we haven’t seen the growth,” said Jonathan Gencher, Toronto-based director of currency sales at BMO Capital Markets, a unit of Canada’s fourth-largest bank. “Today risk is off.”

Canada’s currency still was headed for its first three- month gain in four quarters. It appreciated the most last month in almost six decades as investors ventured out of havens such as the greenback and yen into riskier assets, including stocks and commodity-linked currencies. Investors should close bets that the greenback will fall against the loonie, according to Citigroup Inc., which took such a so-called short U.S. dollar position on June 12 at C$1.1191, resulting in a 3 percent loss, a team of strategists wrote today in a note to clients. The USD/CAD is currently trading at 1.1550 as of 9:05am, London Time.

 
The BOE is still thinking about how much more money to pump into the economy rather than when to withdraw existing stimulus, even if there are signs the worst of the downturn is over. A few surveys in the last few weeks have suggested the economy has started growing again or that at the very least its decline is moderating after it shrank by 1.9 percent in the first three months of the year. The Bank of England has cut the interest rate to a record low of 0.5 percent and embarked on a 125 billion pound asset-buying programme which is due to be completed by the end of July.

The GBP/USD is currently trading at 1.6235 as of 9:16am, London Time.

The dollar and the yen gained after China’s government said exports plunged by a record last month, reviving demand for the two currencies as a refuge from the deepening global recession. The U.S. and Japanese currencies strengthened versus those offering higher yields such as the Australian dollar after China’s customs bureau said the trade surplus narrowed to the least since February 2006. “The sharp plunge in exports means China’s growth could slow, boding ill for the region’s economies,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd. This is “sparking buying of the dollar and the yen.”

The USD/JPY is currently trading at 98.45 as of 8:45am, GMT.
THE EURO
The euro fell for the first time in four days against the yen on speculation European Central Bank council member Erkki Liikanen will signal policy makers may cut interest rates further. Policy makers are ready to cut rates to zero if necessary, ECB Executive Board member Lorenzo Bini Smaghi said, according to a report in the Boersen-Zeitung newspaper yesterday. The Australian and New Zealand dollars retreated from one-week highs after China said its trade surplus plunged as exports fell by a record, raising speculation demand for the South Pacific nations’ commodities will weaken. “The markets have been spooked by the weak figures, particularly the Chinese export numbers,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “The sell-off has gone a little too far in the near-term and the Aussie should recover back to 64.50 U.S. cents,” she said. The EUR/AUD is currently trading at 1.9701 as of 9:00am, GMT.

THE POUND
The pound fell to its weakest in more than five weeks against the euro after Britain’s housing sales slipped to the lowest level since at least 1978 and manufacturing shrank the most in four decades. The U.K. currency dropped for a third day versus the 16- nation currency as the Bank of England prepared to print money to buy assets as part of a quantitative easing policy. “Investors are saying we don’t like the banking situation in the U.K., the housing data was bad, and we’re nervous about the economy,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “Quantitative easing is about to begin, and all these factors tell us to stand aside and wait until it gets cheaper.” The GBP/USD is currently trading $1.3730 as of 9:05am, GMT.

Reproduced from Finotec Analysis Team
11 March 2009

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The Yen falls against the Dollar as safe haven allure weakens

The yen fell against the dollar before government reports this week that may show the world’s second-largest economy is deteriorating, reducing the allure of the currency. Japan’s currency also approached the weakest level in a month versus the euro after Prime Minister Taro Aso’s approval rating slumped 6.8 percentage points to 11.4 percent in a survey published today by Sankei newspaper.

The dollar declined versus the euro on speculation a U.S. report today will show home prices fell at the fastest pace on record in December. “The yen appears to be losing some of its safe-haven status,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Japan’s economic and political situation is poor. The yen is weakening.” The USD/JPY is currently trading at 95.25 as of 8:30am, GMT.

German business confidence may hold steady in February as executives weigh the government’s stimulus program and interest-rate cuts from the European Central Bank, a survey of economists shows. German lawmakers last week agreed to more than double the government’s fiscal stimulus to about 80 billion euros ($105 billion) to stem the country’s worst recession since World War II. The ECB has also signaled it will cut interest rates to a record low next month as the global economic slump prompts companies to reduce production and lay off workers.

The International Monetary Fund expects the German economy, Europe’s largest, to contract 2.5 percent this year. “There is still hope that all the stimulus programs will help revive the economy in the second half of the year,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “The economy is at rock bottom at the moment and it can’t really get any worse.” The EUR/USD is currently trading at $1.2750 as of 9:05am, GMT.
Sterling rose broadly on Monday, hitting its highest in seven weeks against the Japanese yen, led by rallying stock markets after reports the U.S. government may boost its stake in embattled lender Citigroup.

The pound also rose sharply against a weakened euro after European Central Bank chief Jean-Claude Trichet highlighted severe pressure on the currency zone’s financial system.

“Generally, we are just playing a little bit of the risk aversion side, with stocks rallying more broadly,” said Naeem Wahid, currency strategist at Bank of Scotland Treasury Services.”Higher risk currencies like sterling, the Australian dollar and the New Zealand dollar are all up on the day, and sterling is just getting that outperformance,” he added.

The GBP/USD is currently trading $1.4530 as of 9:20am, GMT.

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Finotec Analysis Team
24 February 2009

The euro rose against the dollar after European banks reported fourth-quarter results that beat some analysts’ forecasts, easing concern the region’s financial crisis will worsen. The European currency snapped two days of losses versus the greenback and the yen after Commerzbank AG, Germany’s second- largest bank, posted a net loss of 809 million euros ($1.02 billion), compared with analysts’ median estimate for a loss of 851 million euros.

ING Groep NV, the biggest Dutch financial company, had a loss of 3.71 billion euros, versus the 3.9 billion-euro loss it forecast last month. “Worries are mounting over the financial situation in central and eastern Europe, especially about countries that have large exposure to those regions,” said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co. “The euro is likely to depreciate” to $1.25 and 115.50 yen today, he said. The EUR/USD is currently trading at $1.2620 as of 8:30am, GMT.

The dollar may gain against the yen in the next three months should it rise above so-called resistance at 94.63 yen, based on trading patterns, Standard Chartered Plc said. in Singapore. The 94.63 yen level would match the greenback’s highest this year, reached Jan. 6, as well as creating potential for a so-called double bottom on a daily chart using 13-week moving averages, Callum Henderson, head of global currency strategy at Standard Chartered in Singapore, wrote in a note to clients.

A double bottom forms when a currency makes two successive troughs of similar depth, indicating potential for it to rebound. The USD/JPY is currently trading at 92.40 as of 8:45am, GMT.
Sterling bounced off two-week lows against the dollar on Tuesday after consumer price inflation fell less than expected in January, but gains were capped by investor risk aversion that gave a broad boost to the dollar.

The pound strengthened against the euro after Moody’s ratings agency said recession in eastern Europe would affect Austrian, Italian, French, German, Belgian and Swedish banks due to their exposure to the region. “The BoE remains very focused on the underlying economic situation. We are moving towards the next stage of the cycle, quantitative easing, and it seems very unlikely that the (CPI) report will do anything to blunt that course of action,” said Simon Derrick, head of currency research at Bank of NY Mellon.

The GBP/USD is currently trading at $1.4170 as of 9:15am, GMT.

Finotec Analysis Team
18 February 2009

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Highlights of the past week

Another bleak five days featured more negative forecasts for the UK economy, an apology for the failure of two UK banking giants plus a muted reception from investors for the latest US bail-out proposals. Barclays stole headlines at the week’s outset though, after revealing a profit for 2008 of £6.08 billion, which included £2.2 billion resulting from its takeover of Lehman Brothers‘ North American operations. While 14% down year-on-year, the figures beat expectations as Barclays shares rose 11% to 116.2p. On Tuesday the former heads of RBS and HBOS apologised to the Treasury Select Committee for the banks’ demise, with ex-RBS chairman, Sir Tom McKillop, admitting the acquisition of Dutch bank ABN Amro had been a “bad mistake”.

After a positive start to trading on Friday the UK banking sector plunged during the afternoon, after Lloyds Banking Group said HBOS would make a bigger annual pre-tax loss than previously forecast, at around £10 billion. Lloyds fell 30%, dragging Barclays and RBS lower. A triple dose of banking job culls were unveiled on Tuesday, after RBS confirmed 2300 UK job losses, while Morgan Stanley and UBS also announced around 2000 global job cuts each, as the fallout from the worldwide banking crisis continued. Meanwhile after Tuesday’s unveiling of the latest $1.5 trillion US bank bail-out plan was branded as ‘vague’ by analysts, the Dow sunk 381.99 points (-4.62%), falling back through the 8000 level to 7888.88.

The UK’s gloomy outlook was compounded by Monday’s comments from Ed Balls, describing the current recession as the most serious for more than a century. Those downbeat words were reinforced by Mervyn King midweek, after the Bank of England estimated the UK economy will contract by 4% on an annual basis into next year. Mr King also admitted that a quantitative easing policy was a probable course of action, with any further interest rate cuts likely to have a negligible effect. Meanwhile official data on Wednesday showed UK jobless numbers rose by 146,000 to 1.97 million during the final quarter of 2008, the highest level since August 1997.

The week ahead

A glut of economic data begins with UK inflation figures on Tuesday, followed by minutes from the Bank of England and FOMC’s last rate-setting meetings at home and in the US on Wednesday. On Thursday, money-lending figures at home will be accompanied by trade-balance data from the eurozone.

In companies, quarterlies from Hewlett-Packard, Expedia and JCPenney will be released in the US this week, while at home full-year figures come from BAE Systems on Thursday and mining giant Anglo American on Friday. The week closes with inflation data in the US.

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THE WEEK AHEAD
The labour market data and the Bank of England’s quarterly inflation report will be key to market sentiment in the UK midweek, while in the US all eyes will be trained on the Fed’s Treasury budget report.

Other significant data includes the NIESR’s GDP estimate at home on Monday and inflation figures in the US on Thursday. Also keep an eye out for trade balance data in the UK and US.

Among the company data, Barclays, Rio Tinto and Rolls-Royce put out full-year results at home on Monday and Thursday while half-year figures come from Kofax and BT Group.

In the US, beverages heavyweights Coca-Cola and PepsiCo announce quarterlies along with Teradata and Mariott International.
 
 
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