EUR/USD
Despite falling shy of the 1.4151 upside target, the recovery off 1.4021 is expected to extend above 1.4149. While support at 1.4047 holds, the main threat is for a push through 1.4128 and 1.4149, paving the way for further gains to 1.4188. A clean break below 1.4047 would damage the positive outlook, and prompt a return to Monday's 1.4021 low. However, the underlying uptrend is still intact while 1.3965 holds.
GBP/USD
A lateral consolidation phase is underway between 1.5937 and 1.6041, but a bearish resolution is the main threat. A push below Monday's 1.5937 low would extend the powerful downtrend to the 1.5872/95 area initially, but downside risk to 1.5796 cannot be ruled out on concerted weakness. Definitive resistance lies in the 1.6100/15 area to limit the scope for corrective strength.
USD/JPY
Extends the bull wave above 82.00 to open resistance at 83.01, and the Mar. 11 lower high at 83.30 is the primary target. The completion of a bull flag on the 60-minute chart provides upside projections that highlight potential scope to the 83.40 area before peaking. Corrective weakness will attract support while above 82.48, protecting solid support at 82.00.
AUD/USD
Maintains the powerful uptrend into fresh 29-year highs, as AUD bulls look to test the projected 1.0400/1.0425 area. The structure of the bull wave off Tuesday's 1.0204 low suggests there is scope for the 1.0455 area, which marks the upper side of a resistance cluster. Only a reversal below 1.0269 would question the bullish outlook, exposing 1.0204.
FOREX FOCUS
This looks like the end of the road for sterling's rally. For months, the pound attracted support on hopes that the U.K. economy had seen the worst and that the Bank of England would be able to start raising interest rates soon. Strong inflation data and calls by some monetary policy committee members for early rate moves all encouraged sterling buying. Bank of England Governor Mervyn King even became the target of widespread criticism for suggesting that the economic recovery was still too weak and that rates didn't need to rise. So interest rate hawks continued to set the agenda, helping to push the pound up as high as high as $1.64 earlier this month from under $1.54 at the end of last year. Their assumption has always been that, despite the nasty winter weather at the end of 2010 that put the brakes on economic activity, growth would pick up sufficiently in the first quarter to allow the central bank to start fighting inflation. But, as the first quarter draws to a close, economic data suggest just the opposite and there are signs that King was right to remain cautious after all. Growth is moribund, business confidence is at a two-year low, house prices are still falling and consumer activity, as measured by retail sales, is plummeting. New GDP, consumer and government spending figures, as well as net trade numbers, all suggest that the last thing the U.K. needs at this stage is higher interest rates. This is all hardly surprising given that the bulk of public-sector cuts that the government introduced in an emergency budget last summer are only just starting to take effect and that the country is facing an unexpectedly sharp rise in energy costs. The parlous state of the economy was also recognized in the government's latest budget last week, when Chancellor of the Exchequer George Osborne attempted to ease some of the immediate pressure on U.K. consumers and reduced regulations and taxes in an effort to boost business.
EUROPE
The yen continued to weaken across the board in European trading hours Wednesday, pushed lower by more upbeat market sentiment and growing expectations that the Federal Reserve will move towards policy normalization when its second round of bond-buying ends in June. The dollar has risen to above Y83 against the yen, well above its post-intervention high of Y82, and the euro is hovering around Y117--a 10-month high. "The yen is certainly going to be the most interesting currency today and for the rest of this week and many are starting to argue that there are fundamentals for a weaker yen," said Jane Foley, senior currency strategist at Rabobank in London. "However, this is not a particularly good week to talk about chance in the trend because it is fiscal year-end in Japan," she added. This time of year typically sees a stronger yen as Japanese companies bring funds home. Foley also points out that the yen could benefit if the market becomes less upbeat. "There's still a lot of bad news. There's a lot of potential for risk appetite to falter, which could lead to more yen buying," she added.
ASIA
The dollar climbed to a near three-week high against the yen in Asia Wednesday as traders scrambled to buy the greenback on speculation that the U.S. Federal Reserve will not extend its quantitative easing program beyond the end of June. At 0450 GMT, the dollar was at Y82.90, after rising as high as Y83.01 according to EBS via CQG, the highest since March 11. It was at Y82.48 late Tuesday in New York. Federal Reserve Bank of Dallas President Richard Fisher said in an interview with Fox Business that he doesn't support further liquidity provision from the U.S. central bank and doesn't expect the Fed to launch a third program of asset purchases. "I cannot foresee a circumstance where I can support any further liquidity in the economy," Fisher said, according to excerpts from an interview that the network is to air Tuesday night U.S. time. Fisher's remarks echoed those made recently by St. Louis Fed President James Bullard, as well as Philadelphia Fed President Charles Plosser that were viewed by traders as a cue to lay the ground for an end to U.S. credit easing.
WORLD
The dollar advanced against some rivals, though it slipped against the euro Tuesday, after a drumbeat of Federal Reserve members threw their support behind an end to quantitative easing. A gradual move from easing toward tighter monetary policy would make dollar assets relatively attractive. Currency market participants view the recent comments by St. Louis Fed President James Bullard, as well as Philadelphia Fed President Charles Plosser as a signal to prepare for an end to loose U.S. monetary policy. "The markets are now finally contemplating life without [quantitative easing]," said Paresh Upadhyaya, head of Americas G10 FX strategy at Bank of America Merrill Lynch. "It's all about interest-rate differentials." The dollar lost ground against the euro, amid growing anticipation that Europe's central bank will raise rates next month, well ahead of any Fed move. As worries about Japan's nuclear situation and upheaval in the Middle East and North Africa appear to have momentarily subsided, investors have shifted their focus back to central bank monetary policy and interest-rate differentials, analysts said. The Fed's $600 billion Treasurys-buying program is scheduled to end in June.
Rabu, 30 Maret 2011
Kamis, 24 Maret 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Support in the 1.4035/50 region is under threat, having completed a near-term head-and-shoulders top on the intraday chart on Wednesday. However, the dominant uptrend will remain intact whilst projected support at 1.3965 holds. Regaining ground above 1.4130 would lift the tone, and above 1.4215 would bring this week's high at 1.4249 back into focus.
GBP/USD
Corrective weakness has room to extend below Wednesday's 1.6218 low, towards the 1.6175/90 area. The 50% Fibonacci retracement level of the 1.5978/1.6401 rally resides in this area, and backup support lies at 1.6125. Keeping 1.6218 intact, combined with a clean break above 1.6272 would lift the tone, prompting a recovery back towards the 1.6386.
USD/JPY
Remains trapped within a tight 80.52/81.32 range, and more of the same is expected during Thursday's current session. However, the main threat is for a bearish resolution, and a break below 80.70 would expose the 80.52 low. Downside projections suggest there is room for 80.00 and the significant 79.75 level in the coming sessions. Only a break above 81.32 would create room for further gains towards the March 18 reaction high at 82.00.
AUD/USD
The powerful short-term uptrend remains intact, as the March 11 high at 1.0160 comes under pressure. The key lower high at 1.0203 from March 1 would come within striking distance on a break through 1.0160, as the recovery off the March 17 reaction low at 0.9705 strengthens. Corrective weakness is limited to the 1.0035 area.
FOREX FOCUS
This could finally be the time to take up short positions in the yen. The G-7 intervention Friday may have helped to halt the Japanese currency's rally, but the loss of haven status as well as post-quake policies will likely ensure the yen turns down. In the days immediately after the tsunami and nuclear crisis in Japan, the yen appeared unstoppable, surging on global uncertainty and widespread talk of heavy repatriation flows for reconstruction. Fears that the yen's strength would damage the Japanese economic recovery prompted G-7 central banks to step in, their first coordinated intervention in over 10 years, driving the dollar from well under Y79 to back up over Y80, where it has remained relatively stable ever since. The funny thing is, the upward pressures on the yen may not have been so strong after all. Not only has the currency failed to resume its rally after the G-7 intervened, but the whole exercise now looks to have been much smaller than initially thought. The finance ministry in Tokyo suggests that Bank of Japan sales last Friday amounted to only about Y0.53 trillion, well below the market's estimate of at least Y2 trillion. As March, and Japan's fiscal year, draws to a close, there could be some increased flows from Japanese investors bringing their money home. But the wave of the repatriation the market so feared immediately after the earthquake shows little sign of materializing. For the yen's longer-term performance, Japan policies in the months ahead will make all the difference.
EUROPE
The euro pushed higher across the board in European trading hours Thursday despite peripheral concerns re-emerging ahead of the European Union summit as the prospect of interest rate rises from the European Central Bank continued to provide support for the single currency. The 17-country currency is higher against the dollar, yen, pound and regional currencies of Switzerland and Sweden despite the collapse of Portugal's government and news that Moody's had taken multiple rating actions on Spanish banks. "This year interest rate differentials have been the overwhelming factor behind moves in the euro against the dollar and looking at today's activity that is very much still the case," said Jane Foley, a foreign-exchange analyst at Rabobank in London. The euro has been favoured over the dollar ever since the European Central Bank indicated interest rate rises are on the horizon. In the near term though, the euro could see some volatility with the two-day European Union summit due to kick-off later Thursday. "The real issue facing the euro today and tomorrow remains the EU summit and more specifically the ability of Eurozone officials to reach a compromise on the extension of the European Financial Stability Fund and the creation of the European Stability Mechanism--the two bailout facilities which are needed to provide insurance against potential further problems in the euro zone periphery," a strategist covering the Group of 10 industrial nations at Citigroup said.
ASIA
The euro pared earlier gains against the dollar in Asian trading Thursday as concerns over sovereign debt problems in the euro zone prompted traders to take profits, but the single currency found support as traders here downplayed the risk that the European debt woes will keep worsening. "It isn't a situation where the European debt problem will continue to worsen. So the euro is unlikely to fall further," said Dai Sato, vice president of the foreign exchange division at Mizuho Corporate Bank. Portugal's parliament rejected on Wednesday new budget curbing measures proposed by Prime Minister Jose Socrates, who immediately tendered his resignation. "The news itself did not have a lasting impact here as the outcome was mostly anticipated," Sato added. During morning trade, the euro fell against the dollar on an Expansion report in its Internet edition Thursday that Moody's will downgrade the credit ratings of Spanish banks today. The euro was further dragged down by comments from a Swedish official on the likelihood of a "number" of banks failing the forthcoming EU stress test. Swedish FSA Official Lars Frisell tells Dow Jones "there will be a number of banks failing the stress test."
WORLD
The euro slid Wednesday in New York, as a rejection of austerity measures by Portugal's parliament provided a harsh reminder to investors that the euro-zone's fiscal woes remain unresolved. Portugal's government was thrown into uncertainty after the parliament rejected new budget-curbing measures proposed by Prime Minister Jose Socrates, who immediately tendered his resignation. Analysts have warned that the government's collapse could greatly increase pressure on the country to take an international bailout. Portugal is one of the euro zone's most financially vulnerable economies. As such, analysts fear that the "no" vote will incur the wrath of bond investors that have sent yields on Portuguese debt soaring to unsustainable levels. "The political situation in Portugal ... has taken the shine off the euro," said Joe Manimbo, senior market analyst at Travelex Global Business Payments. Over the last few weeks, the euro has surged as investors chased expectations of higher returns ahead of an expected interest rate hike by the European Central Bank, perhaps as soon as next month. Expectations of an ECB rate hike "will help limit the downside, but a weaker euro story has further room to run if concerns continue to escalate about the health of euro-zone nations," he added. All eyes are on a key European Union summit scheduled for this week. Analysts expect a blueprint for a bailout mechanism for the 17-nation currency bloc's most financially strapped members.
Support in the 1.4035/50 region is under threat, having completed a near-term head-and-shoulders top on the intraday chart on Wednesday. However, the dominant uptrend will remain intact whilst projected support at 1.3965 holds. Regaining ground above 1.4130 would lift the tone, and above 1.4215 would bring this week's high at 1.4249 back into focus.
GBP/USD
Corrective weakness has room to extend below Wednesday's 1.6218 low, towards the 1.6175/90 area. The 50% Fibonacci retracement level of the 1.5978/1.6401 rally resides in this area, and backup support lies at 1.6125. Keeping 1.6218 intact, combined with a clean break above 1.6272 would lift the tone, prompting a recovery back towards the 1.6386.
USD/JPY
Remains trapped within a tight 80.52/81.32 range, and more of the same is expected during Thursday's current session. However, the main threat is for a bearish resolution, and a break below 80.70 would expose the 80.52 low. Downside projections suggest there is room for 80.00 and the significant 79.75 level in the coming sessions. Only a break above 81.32 would create room for further gains towards the March 18 reaction high at 82.00.
AUD/USD
The powerful short-term uptrend remains intact, as the March 11 high at 1.0160 comes under pressure. The key lower high at 1.0203 from March 1 would come within striking distance on a break through 1.0160, as the recovery off the March 17 reaction low at 0.9705 strengthens. Corrective weakness is limited to the 1.0035 area.
FOREX FOCUS
This could finally be the time to take up short positions in the yen. The G-7 intervention Friday may have helped to halt the Japanese currency's rally, but the loss of haven status as well as post-quake policies will likely ensure the yen turns down. In the days immediately after the tsunami and nuclear crisis in Japan, the yen appeared unstoppable, surging on global uncertainty and widespread talk of heavy repatriation flows for reconstruction. Fears that the yen's strength would damage the Japanese economic recovery prompted G-7 central banks to step in, their first coordinated intervention in over 10 years, driving the dollar from well under Y79 to back up over Y80, where it has remained relatively stable ever since. The funny thing is, the upward pressures on the yen may not have been so strong after all. Not only has the currency failed to resume its rally after the G-7 intervened, but the whole exercise now looks to have been much smaller than initially thought. The finance ministry in Tokyo suggests that Bank of Japan sales last Friday amounted to only about Y0.53 trillion, well below the market's estimate of at least Y2 trillion. As March, and Japan's fiscal year, draws to a close, there could be some increased flows from Japanese investors bringing their money home. But the wave of the repatriation the market so feared immediately after the earthquake shows little sign of materializing. For the yen's longer-term performance, Japan policies in the months ahead will make all the difference.
EUROPE
The euro pushed higher across the board in European trading hours Thursday despite peripheral concerns re-emerging ahead of the European Union summit as the prospect of interest rate rises from the European Central Bank continued to provide support for the single currency. The 17-country currency is higher against the dollar, yen, pound and regional currencies of Switzerland and Sweden despite the collapse of Portugal's government and news that Moody's had taken multiple rating actions on Spanish banks. "This year interest rate differentials have been the overwhelming factor behind moves in the euro against the dollar and looking at today's activity that is very much still the case," said Jane Foley, a foreign-exchange analyst at Rabobank in London. The euro has been favoured over the dollar ever since the European Central Bank indicated interest rate rises are on the horizon. In the near term though, the euro could see some volatility with the two-day European Union summit due to kick-off later Thursday. "The real issue facing the euro today and tomorrow remains the EU summit and more specifically the ability of Eurozone officials to reach a compromise on the extension of the European Financial Stability Fund and the creation of the European Stability Mechanism--the two bailout facilities which are needed to provide insurance against potential further problems in the euro zone periphery," a strategist covering the Group of 10 industrial nations at Citigroup said.
ASIA
The euro pared earlier gains against the dollar in Asian trading Thursday as concerns over sovereign debt problems in the euro zone prompted traders to take profits, but the single currency found support as traders here downplayed the risk that the European debt woes will keep worsening. "It isn't a situation where the European debt problem will continue to worsen. So the euro is unlikely to fall further," said Dai Sato, vice president of the foreign exchange division at Mizuho Corporate Bank. Portugal's parliament rejected on Wednesday new budget curbing measures proposed by Prime Minister Jose Socrates, who immediately tendered his resignation. "The news itself did not have a lasting impact here as the outcome was mostly anticipated," Sato added. During morning trade, the euro fell against the dollar on an Expansion report in its Internet edition Thursday that Moody's will downgrade the credit ratings of Spanish banks today. The euro was further dragged down by comments from a Swedish official on the likelihood of a "number" of banks failing the forthcoming EU stress test. Swedish FSA Official Lars Frisell tells Dow Jones "there will be a number of banks failing the stress test."
WORLD
The euro slid Wednesday in New York, as a rejection of austerity measures by Portugal's parliament provided a harsh reminder to investors that the euro-zone's fiscal woes remain unresolved. Portugal's government was thrown into uncertainty after the parliament rejected new budget-curbing measures proposed by Prime Minister Jose Socrates, who immediately tendered his resignation. Analysts have warned that the government's collapse could greatly increase pressure on the country to take an international bailout. Portugal is one of the euro zone's most financially vulnerable economies. As such, analysts fear that the "no" vote will incur the wrath of bond investors that have sent yields on Portuguese debt soaring to unsustainable levels. "The political situation in Portugal ... has taken the shine off the euro," said Joe Manimbo, senior market analyst at Travelex Global Business Payments. Over the last few weeks, the euro has surged as investors chased expectations of higher returns ahead of an expected interest rate hike by the European Central Bank, perhaps as soon as next month. Expectations of an ECB rate hike "will help limit the downside, but a weaker euro story has further room to run if concerns continue to escalate about the health of euro-zone nations," he added. All eyes are on a key European Union summit scheduled for this week. Analysts expect a blueprint for a bailout mechanism for the 17-nation currency bloc's most financially strapped members.
Rabu, 23 Maret 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Corrects lower towards the 1.4105 area, after setting a fresh 20-week high at 1.4249. The bear wave needs to push below 1.4153 in order to expose the 1.618 Fibonacci extension target at 1.4105, but downside risk is limited at this stage. Bulls still remain in control of the short term while 1.4105 holds, and a push above 1.4218 would open the 1.4249 high again. The Nov. 4 reaction high at 1.4283 is the main upside target.
GBP/USD
Tuesday's strength leaves GBP in a good position to extend the recovery through resistance at 1.6401. Tuesday's highest close since December 2009 suggests there is scope for further gains to the January 2010 lower reaction high at 1.6458, and 1.6500. Corrective weakness has scope to the 1.6293 area, and only below there would defer the bullish outlook.
USD/JPY
Volatility has reduced significantly, and the dominant downtrend will look to challenge support at 80.52. Downside projections from Monday's lower high at 81.32 suggest there is room for 80.00 and the significant 79.75 level in the coming sessions. Regaining ground above 81.07 would provide respite, but only above 81.32 would lift the tone.
AUD/USD
Tuesday's high at 1.0130 is under threat as the powerful short-term uptrend looks to extend towards the March 11 high at 1.0160. The key lower high at 1.0203 from March 1 would then come within striking distance, as the recovery off the March 17 reaction low at 0.9705 strengthens. Corrective weakness below 1.0064 would prompt a limited setback towards the 1.0000 level before finding a base.
FOREX FOCUS
The dollar has even fewer friends now than it had before. Events over the past few weeks in Japan and the Middle East may have provided some distraction for financial markets, with currencies being driven more by fear than global economics. But now, as these immediate fears subside, global inflation concerns are returning with a vengeance and the dollar has been found wanting. Not only has the U.S. currency's trade-weighted index tumbled to a 15-month low, with the dollar falling against most other majors, but it is falling to new record lows against some emerging-market currencies, including both the Singapore dollar and the Chinese yuan. The problem for the dollar is this. While global inflation fears have intensified and most other central banks are talking about or raising interest rates, the U.S. Federal Reserve has remained silent. Essentially, investors are looking at the global interest-rate profile and assuming that the U.S. is falling behind the curve. As fears about a nuclear catastrophe in Japan subside, investors are not only looking at the impact the earthquake devastation will have on global growth but also on the impact it will have on the Japanese supply chain and the price of food. This comes at a time when food prices were already on the rise due to grain shortages among many major producers. The attack by U.S., U.K. and French forces on Libya shouldn't have a major direct effect on oil prices. But as political unrest spreads to Syria and Yemen, tensions in the Middle East are likely to remain high, contributing to a continued strong performance by crude oil prices. There are already signs that this is creating unwanted price pressures, with the U.K. reporting Tuesday that its inflation rate rose to 4.4% last month, even more than the 4.3% that was expected. In the euro zone, the European Central Bank has made it pretty clear that it is ready to start raising rates as early as next month, despite all the uncertainties about Libya and Japan, and even the continuing threat of a sovereign-debt crisis among its peripheral members now that details of a longer-term European Stability Mechanism have been negotiated.
EUROPE
The pound lost its footing above $1.63 against the dollar Wednesday in European trading after the minutes of the Bank of England's meeting earlier this month disappointed market expectations by failing to ramp up the aggressive tone on rising inflation. The central bank's tone was a little more tentative, as it signalled a wait-and-see approach given the uncertainties for economic growth and the forces driving inflation. That led some investors to scale back expectations that the BOE will lift interest rates soon, and in turn weighed on the pound. News of spiralling inflation, with the key annual inflation rate hitting its highest level since October 2008 in data released Tuesday, had triggered fresh support for the pound, taking it close to $1.64 against the dollar "The problem is that the Monetary Policy Committee is driven not by inflation in itself, but by what the inflation means," said Daragh Maher, currency strategist at Credit Agricole. This would mean the central bank is on the watch for knock-on effects from increases in headline inflation, particularly wages, rather than just responding to rising price trends. That said, the central bank warned that the headline annual inflation rate may well top 5% in the coming months. It tempered that assessment by saying that it will learn more about the forces driving inflation over the coming months and that it remains too early to gauge the strength of economic recovery in the U.K.
ASIA
The yen strengthened slightly against the dollar and euro in Asia Wednesday as the broadening fallout from Japan's nuclear reactor crisis weighed on share prices, increasing demand for the country's low-yielding unit, considered a safe-haven. But dealers said sharper rises would continued to be limited by expectations that any such gains could prompt Japan's Ministry of Finance to order intervention to curb the currency. The dollar would likely hold in a relatively narrow band around Y81.00 for the rest of the global day, dealers said, as investors hesitate to make major bets amid the continued uncertainty over the situation in Japan as well as the military operations in Libya. The Tokyo Metropolitan Government said Wednesday that radioactive iodine exceeding permissible levels for infants has been detected in tap water in Tokyo, adding to concerns over the broadening scope of contamination from the earthquake and tsunami-stricken Fukushima Daiichi reactors about 150 miles north of the capital. "People want to see how things go with the nuclear reactors, and there is also the uncertainty with the geopolitical situation in northern Africa and the Middle East," said Shuichi Kanehira, a senior foreign exchange dealer at Mizuho Corporate Bank.
WORLD
Tuesday in New York the U.K. pound hit its strongest level against the dollar since January 2010 after rising inflation in that country led investors to bet that the Bank of England would soon be forced to increase key rates. The euro also pushed farther above the psychologically key $1.42 level to its highest since November, as tough-on-inflation comments from the region's central bankers also hinted at an impending rate rise. Both left the dollar sidelined, as the easy-money Federal Reserve is increasingly seen as likely to lag other major central banks that are mapping their way to normalizing monetary policy, while the Fed continues down the road of ultralow rates and large-scale asset purchases. "If you look at the major central banks of the world, the ECB [European Central Bank] has signaled that it's about to tighten imminently," said Constantine Ponticos, managing director of investment management research in London for Pareto, which manages more than $50 billion in currencies. "The BOE is, I would say, in the eyes of the market losing credibility unless it signals a hike," Ponticos said. Some members of the Fed, meanwhile, are signaling that they are becoming less comfortable with policy meant to prop a U.S. economy whose recovery may no longer need the stimulus of loose policy, "although they haven't signaled any imminent" moves to tighten, he said
Corrects lower towards the 1.4105 area, after setting a fresh 20-week high at 1.4249. The bear wave needs to push below 1.4153 in order to expose the 1.618 Fibonacci extension target at 1.4105, but downside risk is limited at this stage. Bulls still remain in control of the short term while 1.4105 holds, and a push above 1.4218 would open the 1.4249 high again. The Nov. 4 reaction high at 1.4283 is the main upside target.
GBP/USD
Tuesday's strength leaves GBP in a good position to extend the recovery through resistance at 1.6401. Tuesday's highest close since December 2009 suggests there is scope for further gains to the January 2010 lower reaction high at 1.6458, and 1.6500. Corrective weakness has scope to the 1.6293 area, and only below there would defer the bullish outlook.
USD/JPY
Volatility has reduced significantly, and the dominant downtrend will look to challenge support at 80.52. Downside projections from Monday's lower high at 81.32 suggest there is room for 80.00 and the significant 79.75 level in the coming sessions. Regaining ground above 81.07 would provide respite, but only above 81.32 would lift the tone.
AUD/USD
Tuesday's high at 1.0130 is under threat as the powerful short-term uptrend looks to extend towards the March 11 high at 1.0160. The key lower high at 1.0203 from March 1 would then come within striking distance, as the recovery off the March 17 reaction low at 0.9705 strengthens. Corrective weakness below 1.0064 would prompt a limited setback towards the 1.0000 level before finding a base.
FOREX FOCUS
The dollar has even fewer friends now than it had before. Events over the past few weeks in Japan and the Middle East may have provided some distraction for financial markets, with currencies being driven more by fear than global economics. But now, as these immediate fears subside, global inflation concerns are returning with a vengeance and the dollar has been found wanting. Not only has the U.S. currency's trade-weighted index tumbled to a 15-month low, with the dollar falling against most other majors, but it is falling to new record lows against some emerging-market currencies, including both the Singapore dollar and the Chinese yuan. The problem for the dollar is this. While global inflation fears have intensified and most other central banks are talking about or raising interest rates, the U.S. Federal Reserve has remained silent. Essentially, investors are looking at the global interest-rate profile and assuming that the U.S. is falling behind the curve. As fears about a nuclear catastrophe in Japan subside, investors are not only looking at the impact the earthquake devastation will have on global growth but also on the impact it will have on the Japanese supply chain and the price of food. This comes at a time when food prices were already on the rise due to grain shortages among many major producers. The attack by U.S., U.K. and French forces on Libya shouldn't have a major direct effect on oil prices. But as political unrest spreads to Syria and Yemen, tensions in the Middle East are likely to remain high, contributing to a continued strong performance by crude oil prices. There are already signs that this is creating unwanted price pressures, with the U.K. reporting Tuesday that its inflation rate rose to 4.4% last month, even more than the 4.3% that was expected. In the euro zone, the European Central Bank has made it pretty clear that it is ready to start raising rates as early as next month, despite all the uncertainties about Libya and Japan, and even the continuing threat of a sovereign-debt crisis among its peripheral members now that details of a longer-term European Stability Mechanism have been negotiated.
EUROPE
The pound lost its footing above $1.63 against the dollar Wednesday in European trading after the minutes of the Bank of England's meeting earlier this month disappointed market expectations by failing to ramp up the aggressive tone on rising inflation. The central bank's tone was a little more tentative, as it signalled a wait-and-see approach given the uncertainties for economic growth and the forces driving inflation. That led some investors to scale back expectations that the BOE will lift interest rates soon, and in turn weighed on the pound. News of spiralling inflation, with the key annual inflation rate hitting its highest level since October 2008 in data released Tuesday, had triggered fresh support for the pound, taking it close to $1.64 against the dollar "The problem is that the Monetary Policy Committee is driven not by inflation in itself, but by what the inflation means," said Daragh Maher, currency strategist at Credit Agricole. This would mean the central bank is on the watch for knock-on effects from increases in headline inflation, particularly wages, rather than just responding to rising price trends. That said, the central bank warned that the headline annual inflation rate may well top 5% in the coming months. It tempered that assessment by saying that it will learn more about the forces driving inflation over the coming months and that it remains too early to gauge the strength of economic recovery in the U.K.
ASIA
The yen strengthened slightly against the dollar and euro in Asia Wednesday as the broadening fallout from Japan's nuclear reactor crisis weighed on share prices, increasing demand for the country's low-yielding unit, considered a safe-haven. But dealers said sharper rises would continued to be limited by expectations that any such gains could prompt Japan's Ministry of Finance to order intervention to curb the currency. The dollar would likely hold in a relatively narrow band around Y81.00 for the rest of the global day, dealers said, as investors hesitate to make major bets amid the continued uncertainty over the situation in Japan as well as the military operations in Libya. The Tokyo Metropolitan Government said Wednesday that radioactive iodine exceeding permissible levels for infants has been detected in tap water in Tokyo, adding to concerns over the broadening scope of contamination from the earthquake and tsunami-stricken Fukushima Daiichi reactors about 150 miles north of the capital. "People want to see how things go with the nuclear reactors, and there is also the uncertainty with the geopolitical situation in northern Africa and the Middle East," said Shuichi Kanehira, a senior foreign exchange dealer at Mizuho Corporate Bank.
WORLD
Tuesday in New York the U.K. pound hit its strongest level against the dollar since January 2010 after rising inflation in that country led investors to bet that the Bank of England would soon be forced to increase key rates. The euro also pushed farther above the psychologically key $1.42 level to its highest since November, as tough-on-inflation comments from the region's central bankers also hinted at an impending rate rise. Both left the dollar sidelined, as the easy-money Federal Reserve is increasingly seen as likely to lag other major central banks that are mapping their way to normalizing monetary policy, while the Fed continues down the road of ultralow rates and large-scale asset purchases. "If you look at the major central banks of the world, the ECB [European Central Bank] has signaled that it's about to tighten imminently," said Constantine Ponticos, managing director of investment management research in London for Pareto, which manages more than $50 billion in currencies. "The BOE is, I would say, in the eyes of the market losing credibility unless it signals a hike," Ponticos said. Some members of the Fed, meanwhile, are signaling that they are becoming less comfortable with policy meant to prop a U.S. economy whose recovery may no longer need the stimulus of loose policy, "although they haven't signaled any imminent" moves to tighten, he said
Selasa, 22 Maret 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The powerful uptrend remains intact, and further gains above Monday's high at 1.4240 are expected. The Nov. 4 reaction high at 1.4283 is the main target, which is straddled by two 1.618 Fibonacci extension targets. Monday's low at 1.4138 will look to limit corrective weakness, and only below there would prompt a deeper corrective setback towards 1.4036.
GBP/USD
The March 2 reaction high at 1.6344 is the focus, as the recovery off the March 11 low at 1.5978 powers on. The threat of leaving a seven-week head-and-shoulders top is reducing following the sustained break above 1.6277, although only a break above 1.6344 would negate the top pattern entirely, creating scope for 1.6401 initially. A longer-term target lies at 1.6715. Only a push below 1.6205 would concern bulls, exposing 1.6175 and 1.6061.
USD/JPY
Fresh bear pressure is expected on support at 80.52, as the setback off 82.00 looks to extend. The dominant bear trend is likely to test the 79.75 area, although there is scope for 79.17 before the likelihood of finding a near-term base. Regaining ground above 81.32 is required to re-open the 82.00 high.
AUD/USD
The strong short-term uptrend is extending above 1.0057, to pave the way for the March 11 high at 1.0160. The key lower high at 1.0203 from March 1 would then come within striking distance, as the recovery off the March 17 reaction low at 0.9705 strengthens. Downside risk is limited to the 0.9950 area, which is protected by 1.0033.
FOREX FOCUS
The G-7 will probably soon be able to claim another currency victory, but not just yet. Since Friday's coordinated intervention, only the group's sixth in 30 years, the yen has stabilized, with the dollar trading well over Y80. The sheer increase in yen liquidity, an improvement in global risk appetite over the weekend, and a renewed focus on inflation pressures around the world are all helping to reduce the risk premium in the Japanese currency for now. But, given market uncertainty over just how far the G-7 is prepared to go, investors will likely still test its resolve and start pushing the yen higher again. The dollar's sharp rally, from a low of Y76.25 before the intervention exercise was launched, reflected at least in part, fear over the power of G-7 coordination. As UBS pointed out, the group has succeeded in four of its previous five intervention exercises. Its only failure was in 1987 when interest rate policy failed to support efforts to drive the dollar higher against the Deutsche mark. This time, a combination of Y32 trillion of liquidity injected into the money markets by the Bank of Japan along with G-7 sales of the yen amounting to at least Y2 trillion, will reinforce market expectations that while Japanese monetary policy will continue to ease, the policies of both the euro zone and the U.S. are likely to start moving in the other direction. The bulk of intervention came from the Bank of Japan, as there is essentially no limit to the amount of yen it can sell. Sales by other central banks are capped by the amount of yen reserves they hold in cash rather than securities. As they have limited ammunition at their disposal, any further coordinated intervention is likely to be designed to take the market by surprise, having the maximum effect for the minimum expenditure. This should be enough to do the trick.
EUROPE
Sterling was the center of attention in European trading on foreign exchange markets Tuesday, rising to its highest level against the dollar since January 2010, after inflation data boosted expectations the Bank of England will have to raise interest rates soon. U.K. consumer prices rose 4.4% in the 12 months to February, the highest annual rise in more than two years, the Office for National Statistics said. The higher-than-expected figure pushed sterling up against the dollar and euro as expectations grew among market participants that the Bank of England will have to respond soon to inflationary pressures by raising interest rates. "Inflation numbers out this morning were good for sterling bulls," said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole in London. But in terms of what this means for increases in interest rates, activity numbers are more important, he said. "What will resolve the debate is if growth can recover despite the fact real incomes are being squeezed. If it is, then the neutral members of the monetary policy committee will move towards the rate hike camp," he added.
ASIA
Buying by Japanese exporters pushed the yen up slightly against the dollar and the euro in Asia Tuesday, though gains were limited as short-term investors refrained from getting onboard amid concerns about possible intervention. Japan's Finance Minister Yoshihiko Noda said Tuesday that the Group of Seven leading industrialized nations will continue to cooperate after pledging joint intervention to tame the yen last week. A person familiar with international currency policy told Dow Jones Newswires that Friday's G-7 pledge should not be considered limited only to that day. "It's now a lot harder for speculators to buy the yen, which means for the time being those kinds of speculative moves have likely been suppressed," says Hideaki Inoue, a senior foreign exchange dealer at Mitsubishi UFJ Trust and Banking. "I think the trend should be toward a weaker yen for now given the threat of intervention and the moves by the Bank of Japan to ease further, which make it harder for speculators to buy the yen," said Inoue.
WORLD
The dollar fell to its lowest level in 15 months against a basket of currencies on Monday in New York, driven mainly by a recovery in investors' risk appetite and a surge in demand for the euro. Europe's common currency has the biggest weighting in the dollar index at 57%. Amid anticipation that the European Central Bank (ECB) will hike interest rates as soon as next month, the euro surged to its highest level since Nov. 5. This helped push the dollar index to its lowest since December 2009. As the euro has risen strongly on the back of expectations of higher interest rates in the 17-nation currency bloc, the Federal Reserve bias for maintaining ultra-loose monetary policy -- combined with surging oil prices that threaten to stoke inflation -- has diminished the dollar's allure as a safe haven. Last week's intervention by the Group of Seven stabilized markets and restrained traders willing to buy the yen. As a result, investors who have recently fretted about the global repercussions of Japan's nuclear crisis momentarily bought currencies that offer the potential for higher interest rates
The powerful uptrend remains intact, and further gains above Monday's high at 1.4240 are expected. The Nov. 4 reaction high at 1.4283 is the main target, which is straddled by two 1.618 Fibonacci extension targets. Monday's low at 1.4138 will look to limit corrective weakness, and only below there would prompt a deeper corrective setback towards 1.4036.
GBP/USD
The March 2 reaction high at 1.6344 is the focus, as the recovery off the March 11 low at 1.5978 powers on. The threat of leaving a seven-week head-and-shoulders top is reducing following the sustained break above 1.6277, although only a break above 1.6344 would negate the top pattern entirely, creating scope for 1.6401 initially. A longer-term target lies at 1.6715. Only a push below 1.6205 would concern bulls, exposing 1.6175 and 1.6061.
USD/JPY
Fresh bear pressure is expected on support at 80.52, as the setback off 82.00 looks to extend. The dominant bear trend is likely to test the 79.75 area, although there is scope for 79.17 before the likelihood of finding a near-term base. Regaining ground above 81.32 is required to re-open the 82.00 high.
AUD/USD
The strong short-term uptrend is extending above 1.0057, to pave the way for the March 11 high at 1.0160. The key lower high at 1.0203 from March 1 would then come within striking distance, as the recovery off the March 17 reaction low at 0.9705 strengthens. Downside risk is limited to the 0.9950 area, which is protected by 1.0033.
FOREX FOCUS
The G-7 will probably soon be able to claim another currency victory, but not just yet. Since Friday's coordinated intervention, only the group's sixth in 30 years, the yen has stabilized, with the dollar trading well over Y80. The sheer increase in yen liquidity, an improvement in global risk appetite over the weekend, and a renewed focus on inflation pressures around the world are all helping to reduce the risk premium in the Japanese currency for now. But, given market uncertainty over just how far the G-7 is prepared to go, investors will likely still test its resolve and start pushing the yen higher again. The dollar's sharp rally, from a low of Y76.25 before the intervention exercise was launched, reflected at least in part, fear over the power of G-7 coordination. As UBS pointed out, the group has succeeded in four of its previous five intervention exercises. Its only failure was in 1987 when interest rate policy failed to support efforts to drive the dollar higher against the Deutsche mark. This time, a combination of Y32 trillion of liquidity injected into the money markets by the Bank of Japan along with G-7 sales of the yen amounting to at least Y2 trillion, will reinforce market expectations that while Japanese monetary policy will continue to ease, the policies of both the euro zone and the U.S. are likely to start moving in the other direction. The bulk of intervention came from the Bank of Japan, as there is essentially no limit to the amount of yen it can sell. Sales by other central banks are capped by the amount of yen reserves they hold in cash rather than securities. As they have limited ammunition at their disposal, any further coordinated intervention is likely to be designed to take the market by surprise, having the maximum effect for the minimum expenditure. This should be enough to do the trick.
EUROPE
Sterling was the center of attention in European trading on foreign exchange markets Tuesday, rising to its highest level against the dollar since January 2010, after inflation data boosted expectations the Bank of England will have to raise interest rates soon. U.K. consumer prices rose 4.4% in the 12 months to February, the highest annual rise in more than two years, the Office for National Statistics said. The higher-than-expected figure pushed sterling up against the dollar and euro as expectations grew among market participants that the Bank of England will have to respond soon to inflationary pressures by raising interest rates. "Inflation numbers out this morning were good for sterling bulls," said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole in London. But in terms of what this means for increases in interest rates, activity numbers are more important, he said. "What will resolve the debate is if growth can recover despite the fact real incomes are being squeezed. If it is, then the neutral members of the monetary policy committee will move towards the rate hike camp," he added.
ASIA
Buying by Japanese exporters pushed the yen up slightly against the dollar and the euro in Asia Tuesday, though gains were limited as short-term investors refrained from getting onboard amid concerns about possible intervention. Japan's Finance Minister Yoshihiko Noda said Tuesday that the Group of Seven leading industrialized nations will continue to cooperate after pledging joint intervention to tame the yen last week. A person familiar with international currency policy told Dow Jones Newswires that Friday's G-7 pledge should not be considered limited only to that day. "It's now a lot harder for speculators to buy the yen, which means for the time being those kinds of speculative moves have likely been suppressed," says Hideaki Inoue, a senior foreign exchange dealer at Mitsubishi UFJ Trust and Banking. "I think the trend should be toward a weaker yen for now given the threat of intervention and the moves by the Bank of Japan to ease further, which make it harder for speculators to buy the yen," said Inoue.
WORLD
The dollar fell to its lowest level in 15 months against a basket of currencies on Monday in New York, driven mainly by a recovery in investors' risk appetite and a surge in demand for the euro. Europe's common currency has the biggest weighting in the dollar index at 57%. Amid anticipation that the European Central Bank (ECB) will hike interest rates as soon as next month, the euro surged to its highest level since Nov. 5. This helped push the dollar index to its lowest since December 2009. As the euro has risen strongly on the back of expectations of higher interest rates in the 17-nation currency bloc, the Federal Reserve bias for maintaining ultra-loose monetary policy -- combined with surging oil prices that threaten to stoke inflation -- has diminished the dollar's allure as a safe haven. Last week's intervention by the Group of Seven stabilized markets and restrained traders willing to buy the yen. As a result, investors who have recently fretted about the global repercussions of Japan's nuclear crisis momentarily bought currencies that offer the potential for higher interest rates
Senin, 21 Maret 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The powerful uptrend remains intact, and further gains above Monday's current session high at 1.4200 are expected. The Nov. 4 reaction high at 1.4283 is the main target, which is straddled by two 1.618 Fibonacci extension targets. Corrective weakness will attract support while above 1.4115, and solid support at 1.4050 provides backup.
GBP/USD
The recovery extends to put key resistance in the 1.6277 area under threat. This rally off 1.5978 is forming the right-hand shoulder of a head-and-shoulders top formation, which suggests a peak in the 1.6277 area should be expected. Projected support at 1.6130 needs to be broken in order to attract further weakness towards 1.6061 and the March 15 reaction low at 1.5978. A clean break through 1.6277 would question the six-week uptrend reversal pattern, and open the March 2 reaction high at 1.6344 again.
USD/JPY
The setback off 82.00 is likely to attract fresh pressure on support at 80.52. The dominant bear trend is likely to test the 79.75 area, although there is scope for 79.17 before the likelihood of finding a near-term base. Regaining ground above 81.26 is required to open the 82.00 high again.
AUD/USD
The recovery is expected to extend to the 1.618 Fibonacci target at 1.0057 at least, as bulls look to regain a foothold above parity. A clean break through 1.0057 would bring the focus on to the March 11 high at 1.0160, and strengthen the March 17 reaction low at 0.9705 in the process. Good support lies in the 0.9875/0.9905 area, which is protected by 0.9941.
FOREX FOCUS
China's policy moves are often unpredictable and Friday's decision to raise its bank reserve requirement ratio was no different. Coming only hours after the Group of Seven leading industrial nations had launched a historic coordinated exercise to weaken the yen and help Japan recover from last week's catastrophic earthquake, the announcement triggered a stream of speculation over China's intentions. China does have form in this department. Last year, it chose to raise rates for the first time in about three years soon after Japan had launched its own massive intervention to drive the yen lower. The exercise wasn't particularly successful, but China was soon at it again--raising interest rates when most of the rest of the world was out celebrating Christmas Day. Certainly, the move by G-7 to weaken the yen will not have been popular in Beijing, which has been keeping a very careful cap on the strength of its own currency, the yuan, to keep it competitive. Also, with vast holdings of Japanese government bonds, picked up when it was diversifying its foreign-exchange reserves in the last year or two, the last thing the People's Bank of China wants is a weak yen. However, there is no obvious reason why a move to make bank lending in China more difficult, and thus slow economic activity, would in any way offset a more competitive yen.
EUROPE
The euro was a touch lower in European trading Monday but well supported above the $1.41 level against the dollar as the European Central Bank is thought to be on track to lift interest rates despite the ongoing troubles in Japan and the Middle East. Bombing by allied forces in Libya and protests in Bahrain have propelled oil prices higher and put worries about spiralling inflation levels back at the top of the agenda. But investors' willingness to embark on relatively risky bets, and to buy relatively high-risk currencies, is undimmed. That is supporting the euro and the Australian dollar, for example, while it dents currencies seen as safe retreats, like the yen and the Swiss franc. In all, the market is dominated by a significantly calmer tone than has been seen over the past week or so, particularly when compared to frantic trading conditions as the Group of Seven largest industrialized nations launched its rare coordinated action to weaken and stabilize the yen last Friday. "The two dollar spike in oil is capturing attention but otherwise there is some calm overall," said Simon Derrick, currency strategist at Bank of New York Mellon.
ASIA
Japanese markets are closed for Vernal Equinox Day.
WORLD
The Federal Reserve intervened in the currency market Friday, buying dollars and selling yen as part of a coordinated effort by Group of Seven nations to weaken Japan's currency. It was the first coordinated currency intervention since 2000 and started overnight in Tokyo when the Bank of Japan initiated a promised "battle" against currency speculators by the Ministry of Finance. The Bank of England, Bundesbank, Banque de France and Bank of Italy all then intervened during European trading, and the Bank of Canada also acted.
Nomura Securities estimated Y2 trillion for the BOJ intervention and another $5 billion across Europe. Those coordinated efforts helped send the dollar shooting up as high as Y82 from Y78.93 late Thursday in New York. The initial intervention from the Fed came right at 8 a.m. EDT, the start of the New York trading day. Traders in New York estimated that orders were placed in mostly $50 million blocks with multiple banks and that the Fed likely traded about $600 million. The intervention showed the world's central banks stood with the BOJ in a coordinated effort to push back against speculators who had ridden down the dollar against the yen to record levels early Thursday. The strength of the yen has been a long-time problem for Japanese officials even before this week, as it makes it difficult for its high-tech and auto components export-driven economy to compete in the global market. Japan's strong currency has contributed to deflationary conditions which have proven hard to shake for the world's third-largest economy
The powerful uptrend remains intact, and further gains above Monday's current session high at 1.4200 are expected. The Nov. 4 reaction high at 1.4283 is the main target, which is straddled by two 1.618 Fibonacci extension targets. Corrective weakness will attract support while above 1.4115, and solid support at 1.4050 provides backup.
GBP/USD
The recovery extends to put key resistance in the 1.6277 area under threat. This rally off 1.5978 is forming the right-hand shoulder of a head-and-shoulders top formation, which suggests a peak in the 1.6277 area should be expected. Projected support at 1.6130 needs to be broken in order to attract further weakness towards 1.6061 and the March 15 reaction low at 1.5978. A clean break through 1.6277 would question the six-week uptrend reversal pattern, and open the March 2 reaction high at 1.6344 again.
USD/JPY
The setback off 82.00 is likely to attract fresh pressure on support at 80.52. The dominant bear trend is likely to test the 79.75 area, although there is scope for 79.17 before the likelihood of finding a near-term base. Regaining ground above 81.26 is required to open the 82.00 high again.
AUD/USD
The recovery is expected to extend to the 1.618 Fibonacci target at 1.0057 at least, as bulls look to regain a foothold above parity. A clean break through 1.0057 would bring the focus on to the March 11 high at 1.0160, and strengthen the March 17 reaction low at 0.9705 in the process. Good support lies in the 0.9875/0.9905 area, which is protected by 0.9941.
FOREX FOCUS
China's policy moves are often unpredictable and Friday's decision to raise its bank reserve requirement ratio was no different. Coming only hours after the Group of Seven leading industrial nations had launched a historic coordinated exercise to weaken the yen and help Japan recover from last week's catastrophic earthquake, the announcement triggered a stream of speculation over China's intentions. China does have form in this department. Last year, it chose to raise rates for the first time in about three years soon after Japan had launched its own massive intervention to drive the yen lower. The exercise wasn't particularly successful, but China was soon at it again--raising interest rates when most of the rest of the world was out celebrating Christmas Day. Certainly, the move by G-7 to weaken the yen will not have been popular in Beijing, which has been keeping a very careful cap on the strength of its own currency, the yuan, to keep it competitive. Also, with vast holdings of Japanese government bonds, picked up when it was diversifying its foreign-exchange reserves in the last year or two, the last thing the People's Bank of China wants is a weak yen. However, there is no obvious reason why a move to make bank lending in China more difficult, and thus slow economic activity, would in any way offset a more competitive yen.
EUROPE
The euro was a touch lower in European trading Monday but well supported above the $1.41 level against the dollar as the European Central Bank is thought to be on track to lift interest rates despite the ongoing troubles in Japan and the Middle East. Bombing by allied forces in Libya and protests in Bahrain have propelled oil prices higher and put worries about spiralling inflation levels back at the top of the agenda. But investors' willingness to embark on relatively risky bets, and to buy relatively high-risk currencies, is undimmed. That is supporting the euro and the Australian dollar, for example, while it dents currencies seen as safe retreats, like the yen and the Swiss franc. In all, the market is dominated by a significantly calmer tone than has been seen over the past week or so, particularly when compared to frantic trading conditions as the Group of Seven largest industrialized nations launched its rare coordinated action to weaken and stabilize the yen last Friday. "The two dollar spike in oil is capturing attention but otherwise there is some calm overall," said Simon Derrick, currency strategist at Bank of New York Mellon.
ASIA
Japanese markets are closed for Vernal Equinox Day.
WORLD
The Federal Reserve intervened in the currency market Friday, buying dollars and selling yen as part of a coordinated effort by Group of Seven nations to weaken Japan's currency. It was the first coordinated currency intervention since 2000 and started overnight in Tokyo when the Bank of Japan initiated a promised "battle" against currency speculators by the Ministry of Finance. The Bank of England, Bundesbank, Banque de France and Bank of Italy all then intervened during European trading, and the Bank of Canada also acted.
Nomura Securities estimated Y2 trillion for the BOJ intervention and another $5 billion across Europe. Those coordinated efforts helped send the dollar shooting up as high as Y82 from Y78.93 late Thursday in New York. The initial intervention from the Fed came right at 8 a.m. EDT, the start of the New York trading day. Traders in New York estimated that orders were placed in mostly $50 million blocks with multiple banks and that the Fed likely traded about $600 million. The intervention showed the world's central banks stood with the BOJ in a coordinated effort to push back against speculators who had ridden down the dollar against the yen to record levels early Thursday. The strength of the yen has been a long-time problem for Japanese officials even before this week, as it makes it difficult for its high-tech and auto components export-driven economy to compete in the global market. Japan's strong currency has contributed to deflationary conditions which have proven hard to shake for the world's third-largest economy
Jumat, 18 Maret 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Further gains are expected above 1.4088 as the powerful two-month uptrend threatens to extend. A wave equality target lies at 1.4125, but there is scope for 1.4165 based on the recent intraday higher low at 1.3980. Sterner resistance lies at the top end of the monthly Ichimoku cloud at 1.4185. Congestion between 1.3980 and 1.4036 will attract support, and only below the latter would concern USD bears.
GBP/USD
The corrective recovery extends to put resistance at 1.6199 under threat. This rally off 1.5978 is forming the right-hand shoulder of a head-and-shoulders top formation, which suggests a peak in the 1.6277 area should be expected. A clean break through 1.6277 would question the six-week uptrend reversal pattern, and re-open the Mar. 2 reaction high at 1.6344. A push below 1.6099 would prompt a return to the week's low at 1.5978, where the neckline lies.
USD/JPY
Central banks are manufacturing the recovery off this week's record low at 76.25, and resistance at 82.00 is being challenged. However, the technical bear trend remains intact while the Feb. 16 reaction high at 83.98 holds, and this high is protected by resistance at 83.30. A break below 79.17 is required to attract fresh bear pressure towards 78.26.
AUD/USD
Resistance at 0.9952 is under threat, as the recovery off the week's low at 0.9705 looks to extend. The intraday higher low at 0.9782 suggests a break through 0.9964 should be expected, opening 0.9995 initially, but creating scope for further gains towards the 1.618 Fibonacci extension target at 1.0057. Only a reversal below 0.9782 would bring the 0.9705 low back into the picture.
FOREX FOCUS
The Bank of Japan had better be braced for a big battle as it tries to stop the yen from rising to new record highs against the dollar. Currency intervention only works at the best of times and these are not the best of times for the yen. There is little doubt that the strength of the yen is unwarranted. The currency was overvalued by as much as 6% even before the earthquake in Japan last Friday prompted buying, as the market began to anticipate the repatriation of funds. Also, with Japanese interest rates down at virtually zero and the Bank of Japan pouring in an additional Y31 trillion of liquidity in the last four days alone, yields on the yen can hardly be described as attractive. Nonetheless, as the Bank of Japan found to its cost last September, international support for the Japanese currency remains strong. Back then, the central bank launched its largest ever solo intervention exercise, spending Y2.13 trillion in a futile attempt to stop the dollar from falling under Y85. Needless to say, the dollar kept on falling and a strong yen remained a problem for Japanese exporters as the country struggled to stop slipping back into recession. By the time the earthquake - and then the tsunami - hit Japan's north-east coast nearly a week ago, the dollar was still down at Y83. If anything, the need for a weaker yen now has become even more acute than it was last September. Since the earthquake, the currency has rallied another 8%, breaking to a new record high of Y76.25 against the dollar late on Wednesday. And the growth prospects for the Japanese economy have deteriorated rapidly. For the moment, though, the Bank of Japan is nowhere to be seen. This could be because the bank is choosing to play a cat-and-mouse game that leaves the market guessing over just what it plans to do. Or, it could be because the Japanese are hoping to get international support as the ongoing threat of nuclear contamination from the damaged nuclear reactors at Fukushima still poses a risk for financial markets in general. A weaker yen will then be in the self-interest of other major economies as much as it is now for Japan.
EUROPE
It was an extraordinary trading session in Europe, as several European central banks were seen intervening in a bid to tame the sky-high yen, but after an initial skid lower in yen crosses, the Japanese currency has regained momentum and clawed back some of its losses. Intervention from the Bundesbank, the Banque of France, the Bank of England and later the Bank of Italy came after the Bank of Japan intervened on behalf of the Japanese Ministry of Finance overnight, spending around Y1 trillion to Y2 trillion buying dollars against the yen. The European Central Bank also confirmed that it had participated in selling the Japanese currency. The central banks' efforts managed to push the euro and the dollar higher against the yen at the London open, pushing the euro to Y115.56, a two week-high, and the dollar to Y82. But the Japanese currency later pushed back up to stronger levels than it held before the European central banks' action. "Europe walked in to find the dollar close to Y82.00 against the yen," said Citibank in a note to clients, adding that this spurred speculation whether euro-area banks would step in to currency markets. "The Banque de France appeared to be first out of the gates buying the euro against the yen. [This] was followed by the ECB and Bundesbank and later the Banca d'Italia; the BOE also waded in to buy sterling against the yen." But as the yen bounced back against these currencies immediately after the intervention, Citigroup noted that "the lack of follow through has drawn a lot of 'sniggering' about the effectiveness of intervention." The yen was pushing higher as investors continued to pile into the relative safety of the currency after the Japanese Nuclear Agency said it had raised the accident scale level of the quake-damaged Fukushima Daiichi nuclear plant to level 5, similar to the severity of the accident at Three Mile Island in 1979. The agency said the increased safety warning was due to "serious damage" to the plant's reactors.
ASIA
The U.S. dollar and euro surged against the yen Friday after the Group of Seven finance ministers agreed to joint intervention to weaken the yen, as Japan struggles with multiple natural disasters and an ongoing nuclear emergency. The dollar spiked as high as Y81.84 from around Y79.50 earlier, as G-7 finance ministers issued a communique following a conference call. The dollar was recently at Y81.64. Traders said the united stand added "clout" to the announcement. It marked the first joint G-7 intervention since 2000. "We express our solidarity with the Japanese people in these difficult times, our readiness to provide any needed cooperation and our confidence in the resilience of the Japanese economy and financial sector," the communique said. "We will monitor exchange markets closely and will cooperate as appropriate." Japan's finance minister told reporters that market intervention that occurred from 0000 GMT was from authorities in Japan, and each G-7 country would intervene in their own market. "At a time when Japan is in a difficult situation, it is extremely significant that G-7 authorities agreed to act in concert and cooperate for the stability of the markets," Yoshihiko Noda said. Dealers said the U.S. dollar was likely to continue rising against the yen over the next 24 hours as central banks take their turn at providing support.
WORLD
The yen fell from a record high against the dollar Thursday, as demand for the currency in the wake of Japan's nuclear crisis was temporarily squelched by fears that officials may sell yen to curb its strength. In a seemingly counterintuitive move, demand for the yen has surged as Japan's natural disaster has rapidly transformed into a nuclear crisis that has roiled markets worldwide. On Thursday, the yen's broad strength hammered the dollar to a historical low at Y76.25, and sent the euro to its lowest level since September at Y106.50. In the last week alone, the currency has appreciated by more than 8% amid speculation that Japanese institutions were selling foreign assets in order to send money back to the disaster-stricken country. On Thursday, those flows gave way to concerns that Japan might intervene--perhaps with the help of the world's largest industrialized nations. Analysts, however, are sharply divided on the nature of the investment flows behind the surging yen. While most acknowledge that Japanese repatriation is supporting the yen, they add that widespread risk aversion was leading some investors to unwind "carry trades" that use the low-yielding Japanese currency to fund high-return, riskier positions elsewhere
Further gains are expected above 1.4088 as the powerful two-month uptrend threatens to extend. A wave equality target lies at 1.4125, but there is scope for 1.4165 based on the recent intraday higher low at 1.3980. Sterner resistance lies at the top end of the monthly Ichimoku cloud at 1.4185. Congestion between 1.3980 and 1.4036 will attract support, and only below the latter would concern USD bears.
GBP/USD
The corrective recovery extends to put resistance at 1.6199 under threat. This rally off 1.5978 is forming the right-hand shoulder of a head-and-shoulders top formation, which suggests a peak in the 1.6277 area should be expected. A clean break through 1.6277 would question the six-week uptrend reversal pattern, and re-open the Mar. 2 reaction high at 1.6344. A push below 1.6099 would prompt a return to the week's low at 1.5978, where the neckline lies.
USD/JPY
Central banks are manufacturing the recovery off this week's record low at 76.25, and resistance at 82.00 is being challenged. However, the technical bear trend remains intact while the Feb. 16 reaction high at 83.98 holds, and this high is protected by resistance at 83.30. A break below 79.17 is required to attract fresh bear pressure towards 78.26.
AUD/USD
Resistance at 0.9952 is under threat, as the recovery off the week's low at 0.9705 looks to extend. The intraday higher low at 0.9782 suggests a break through 0.9964 should be expected, opening 0.9995 initially, but creating scope for further gains towards the 1.618 Fibonacci extension target at 1.0057. Only a reversal below 0.9782 would bring the 0.9705 low back into the picture.
FOREX FOCUS
The Bank of Japan had better be braced for a big battle as it tries to stop the yen from rising to new record highs against the dollar. Currency intervention only works at the best of times and these are not the best of times for the yen. There is little doubt that the strength of the yen is unwarranted. The currency was overvalued by as much as 6% even before the earthquake in Japan last Friday prompted buying, as the market began to anticipate the repatriation of funds. Also, with Japanese interest rates down at virtually zero and the Bank of Japan pouring in an additional Y31 trillion of liquidity in the last four days alone, yields on the yen can hardly be described as attractive. Nonetheless, as the Bank of Japan found to its cost last September, international support for the Japanese currency remains strong. Back then, the central bank launched its largest ever solo intervention exercise, spending Y2.13 trillion in a futile attempt to stop the dollar from falling under Y85. Needless to say, the dollar kept on falling and a strong yen remained a problem for Japanese exporters as the country struggled to stop slipping back into recession. By the time the earthquake - and then the tsunami - hit Japan's north-east coast nearly a week ago, the dollar was still down at Y83. If anything, the need for a weaker yen now has become even more acute than it was last September. Since the earthquake, the currency has rallied another 8%, breaking to a new record high of Y76.25 against the dollar late on Wednesday. And the growth prospects for the Japanese economy have deteriorated rapidly. For the moment, though, the Bank of Japan is nowhere to be seen. This could be because the bank is choosing to play a cat-and-mouse game that leaves the market guessing over just what it plans to do. Or, it could be because the Japanese are hoping to get international support as the ongoing threat of nuclear contamination from the damaged nuclear reactors at Fukushima still poses a risk for financial markets in general. A weaker yen will then be in the self-interest of other major economies as much as it is now for Japan.
EUROPE
It was an extraordinary trading session in Europe, as several European central banks were seen intervening in a bid to tame the sky-high yen, but after an initial skid lower in yen crosses, the Japanese currency has regained momentum and clawed back some of its losses. Intervention from the Bundesbank, the Banque of France, the Bank of England and later the Bank of Italy came after the Bank of Japan intervened on behalf of the Japanese Ministry of Finance overnight, spending around Y1 trillion to Y2 trillion buying dollars against the yen. The European Central Bank also confirmed that it had participated in selling the Japanese currency. The central banks' efforts managed to push the euro and the dollar higher against the yen at the London open, pushing the euro to Y115.56, a two week-high, and the dollar to Y82. But the Japanese currency later pushed back up to stronger levels than it held before the European central banks' action. "Europe walked in to find the dollar close to Y82.00 against the yen," said Citibank in a note to clients, adding that this spurred speculation whether euro-area banks would step in to currency markets. "The Banque de France appeared to be first out of the gates buying the euro against the yen. [This] was followed by the ECB and Bundesbank and later the Banca d'Italia; the BOE also waded in to buy sterling against the yen." But as the yen bounced back against these currencies immediately after the intervention, Citigroup noted that "the lack of follow through has drawn a lot of 'sniggering' about the effectiveness of intervention." The yen was pushing higher as investors continued to pile into the relative safety of the currency after the Japanese Nuclear Agency said it had raised the accident scale level of the quake-damaged Fukushima Daiichi nuclear plant to level 5, similar to the severity of the accident at Three Mile Island in 1979. The agency said the increased safety warning was due to "serious damage" to the plant's reactors.
ASIA
The U.S. dollar and euro surged against the yen Friday after the Group of Seven finance ministers agreed to joint intervention to weaken the yen, as Japan struggles with multiple natural disasters and an ongoing nuclear emergency. The dollar spiked as high as Y81.84 from around Y79.50 earlier, as G-7 finance ministers issued a communique following a conference call. The dollar was recently at Y81.64. Traders said the united stand added "clout" to the announcement. It marked the first joint G-7 intervention since 2000. "We express our solidarity with the Japanese people in these difficult times, our readiness to provide any needed cooperation and our confidence in the resilience of the Japanese economy and financial sector," the communique said. "We will monitor exchange markets closely and will cooperate as appropriate." Japan's finance minister told reporters that market intervention that occurred from 0000 GMT was from authorities in Japan, and each G-7 country would intervene in their own market. "At a time when Japan is in a difficult situation, it is extremely significant that G-7 authorities agreed to act in concert and cooperate for the stability of the markets," Yoshihiko Noda said. Dealers said the U.S. dollar was likely to continue rising against the yen over the next 24 hours as central banks take their turn at providing support.
WORLD
The yen fell from a record high against the dollar Thursday, as demand for the currency in the wake of Japan's nuclear crisis was temporarily squelched by fears that officials may sell yen to curb its strength. In a seemingly counterintuitive move, demand for the yen has surged as Japan's natural disaster has rapidly transformed into a nuclear crisis that has roiled markets worldwide. On Thursday, the yen's broad strength hammered the dollar to a historical low at Y76.25, and sent the euro to its lowest level since September at Y106.50. In the last week alone, the currency has appreciated by more than 8% amid speculation that Japanese institutions were selling foreign assets in order to send money back to the disaster-stricken country. On Thursday, those flows gave way to concerns that Japan might intervene--perhaps with the help of the world's largest industrialized nations. Analysts, however, are sharply divided on the nature of the investment flows behind the surging yen. While most acknowledge that Japanese repatriation is supporting the yen, they add that widespread risk aversion was leading some investors to unwind "carry trades" that use the low-yielding Japanese currency to fund high-return, riskier positions elsewhere
Kamis, 17 Maret 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Continues to consolidate between 1.3855 and 1.4013, but downside risk is considered limited at this stage. Resistance at 1.3969 is likely to face renewed bull pressure, and a break through there would re-open Tuesday's high at 1.4013. The key Mar. 7 reaction high at 1.4036 would then come within striking distance. Loss of 1.3866 and 1.3855 would prompt a deeper corrective setback towards the Mar. 11 reaction low at 1.3752.
GBP/USD
Bear pressure is building on last week's 1.5978 low, as a bearish head-and-shoulders top is close to completion. A push below the neckline near 1.5978 is likely to attract a powerful wave of weakness towards a downwave equality target at 1.5835, but there is scope for 1.5771 and the Jan. 25 low at 1.5752. Regaining ground above Wednesday's high at 1.6123 is required to provide respite, but Monday's high at 1.6199 is expected to cap gains.
USD/JPY
A record low at 76.25 was reached during Asia's current trading session, but a recovery is underway towards solid resistance between 79.75 and 80.25. This week's completion of a four-month bear pennant suggests this recovery off 76.25 is corrective, and the main threat is for a return to the all-time low at 76.25. There is more room to the downside towards 75.00 in the coming sessions.
AUD/USD
A good recovery is underway off a 15-week low at 0.9705, and more gains are threatened above resistance at 0.9850. A clean break would extend the recovery towards Wednesday's high at 0.9964, but there is scope for a retest of parity before peaking. Failure to keep 0.9705 intact would put bears back in control, prompting a downtrend extension towards 0.9670 and 0.9537.
FOREX FOCUS
In dangerous times, only the safest of safe havens will do. And these days, that's the Swiss franc. Over the last week or two, the Swiss franc has proven considerably more popular than the other two traditional safe havens: the yen and the dollar. With investors spooked first by the unrest in the Middle East and then the devastating tsunami in Japan, the Swiss currency has climbed to a new all-time high against the dollar. Not only is the currency benefit ting from Switzerland's longtime reputation as a good place to be in troubled times, but it is also getting a boost from the country's robust economic recovery and expectations that Swiss interest rates could rise sooner than those in other major economies. In other words, not only are funds parked in Switzerland safer--they are also likely to earn more. Investors' preference for the franc over the yen is hardly surprising, given the continued threat of a nuclear meltdown in Japan and the uncertain state of the country's economy and fiscal health in the months to come. The yen is still getting support from expectations of repatriation flows but all bets could soon be off if the yen gets too strong. A strong currency is the last thing Japan needs right now, and currency markets are already speculating that other central banks would help the Bank of Japan keep the dollar from falling under Y80. The dollar itself also appears to have lost its edge as a safe haven, at least relative to the franc. The Fed confirmed this week that despite an upturn in inflation and an economy that has found a "firmer footing," it isn't about to deviate from its program of quantitative easing. Investors are probably also put off by the prospect of the U.S. becoming involved in any military action in the Middle East.
EUROPE
The yen inched higher against both the dollar and the euro in European trading hours Thursday as markets remained on high alert for any signs of intervention by Japanese authorities to weaken the yen. The dollar had plummeted to an all-time low against the yen of Y76.25 in very early Asian trading but recovered to stabilise around Y79 on expectations the Bank of Japan would step into the market. The euro also sank to as low as Y106.60 but also clawed back most of its losses to trade at around Y110. But intervention had not materialized in European hours with most strategists arguing that such action is unlikely to happen ahead of the Group of Seven emergency conference call to discuss Japan at 2200 GMT. "The market will be worried all day that [the G-7] are going to come to some agreement that may lend the dollar some support against the yen," said Jane Foley senior currency strategist at Rabobank in London. "There is almost certainly going to be some degree of rhetoric and the risk of actual intervention has risen during the week," she added. Japanese economy minister Kaoru Yosano helped lay the groundwork for intervention, saying that speculative yen purchases in the European market were "groundless". Crucially, Finance Minister Yoshihiko Noda also said he was watching the market closely.
ASIA
The yen pulled back from record highs reached against the dollar earlier in the Asian session Thursday, as markets braced for potential intervention by the Japanese government to force the yen lower. Japanese Finance Minister Yoshihiko Noda said he is closely watching the yen given "nervous movements" and "speculations" in the market. Other Japanese officials also claimed the overnight spike in the yen was driven by speculators, not by repatriation flows in the wake of last Friday's devastating earthquake. However, while the greenback has recovered some its losses against the yen, there are concerns markets are yet to see to the end of the headline-driven panic. "The next few days will be crucial with the nuclear reactor situation," Mitsuru Sahara, a senior FX dealer at Bank of Tokyo-Mitsubishi UFJ, said. "If current efforts to cool the reactors fail and there are meltdowns, there could be panic early next week that would drive the dollar down below Y76 and possibly to Y75." The U.S. dollar plummeted to a record-low of Y76.250 in early Asia trade, but had nosed up to Y78.82 by late Thursday on expectations that the Bank of Japan might intervene. "At the moment, the market is front-running a possible intervention" by the Finance Ministry, said David Forrester, a currency strategist at Barclays Capital. "We think the yen is in a place where such intervention is warranted."
WORLD
The dollar hit its weakest ever level against the yen Wednesday in New York, as Japan's unfolding nuclear crisis prompted speculators to bet that heavy repatriation flows will likely be needed to respond to a deepening disaster. Overall, safe-haven currencies--paradoxically including the yen--soared in extremely volatile trading as traders took in new warnings about possible catastrophic events at Japan's crippled nuclear power plant. The dollar fell as low as Y79.22 according to EBS via CQG, falling below its previous low of Y79.75, hit in April 1995. The dramatic move prompted traders to warn that the likelihood of currency intervention by Japan to curb yen strength had increased sharply. Traders responded en masse to dire warnings from U.S. Energy Secretary Steven Chu who said he believed a "partial meltdown" occurred at the Japanese nuclear power plant damaged by explosions, malfunctions and radiation leaks following the earthquake. Chu added, however, that Japan's Fukushima Daiichi nuclear power plant has containment systems to prevent leaks and that a partial meltdown doesn't mean the "containment systems will fail." "That (caused) a bit of panic," said Paresh Upadhyaya, head of Americas G10 FX strategy at Bank of America Merrill Lynch.
Continues to consolidate between 1.3855 and 1.4013, but downside risk is considered limited at this stage. Resistance at 1.3969 is likely to face renewed bull pressure, and a break through there would re-open Tuesday's high at 1.4013. The key Mar. 7 reaction high at 1.4036 would then come within striking distance. Loss of 1.3866 and 1.3855 would prompt a deeper corrective setback towards the Mar. 11 reaction low at 1.3752.
GBP/USD
Bear pressure is building on last week's 1.5978 low, as a bearish head-and-shoulders top is close to completion. A push below the neckline near 1.5978 is likely to attract a powerful wave of weakness towards a downwave equality target at 1.5835, but there is scope for 1.5771 and the Jan. 25 low at 1.5752. Regaining ground above Wednesday's high at 1.6123 is required to provide respite, but Monday's high at 1.6199 is expected to cap gains.
USD/JPY
A record low at 76.25 was reached during Asia's current trading session, but a recovery is underway towards solid resistance between 79.75 and 80.25. This week's completion of a four-month bear pennant suggests this recovery off 76.25 is corrective, and the main threat is for a return to the all-time low at 76.25. There is more room to the downside towards 75.00 in the coming sessions.
AUD/USD
A good recovery is underway off a 15-week low at 0.9705, and more gains are threatened above resistance at 0.9850. A clean break would extend the recovery towards Wednesday's high at 0.9964, but there is scope for a retest of parity before peaking. Failure to keep 0.9705 intact would put bears back in control, prompting a downtrend extension towards 0.9670 and 0.9537.
FOREX FOCUS
In dangerous times, only the safest of safe havens will do. And these days, that's the Swiss franc. Over the last week or two, the Swiss franc has proven considerably more popular than the other two traditional safe havens: the yen and the dollar. With investors spooked first by the unrest in the Middle East and then the devastating tsunami in Japan, the Swiss currency has climbed to a new all-time high against the dollar. Not only is the currency benefit ting from Switzerland's longtime reputation as a good place to be in troubled times, but it is also getting a boost from the country's robust economic recovery and expectations that Swiss interest rates could rise sooner than those in other major economies. In other words, not only are funds parked in Switzerland safer--they are also likely to earn more. Investors' preference for the franc over the yen is hardly surprising, given the continued threat of a nuclear meltdown in Japan and the uncertain state of the country's economy and fiscal health in the months to come. The yen is still getting support from expectations of repatriation flows but all bets could soon be off if the yen gets too strong. A strong currency is the last thing Japan needs right now, and currency markets are already speculating that other central banks would help the Bank of Japan keep the dollar from falling under Y80. The dollar itself also appears to have lost its edge as a safe haven, at least relative to the franc. The Fed confirmed this week that despite an upturn in inflation and an economy that has found a "firmer footing," it isn't about to deviate from its program of quantitative easing. Investors are probably also put off by the prospect of the U.S. becoming involved in any military action in the Middle East.
EUROPE
The yen inched higher against both the dollar and the euro in European trading hours Thursday as markets remained on high alert for any signs of intervention by Japanese authorities to weaken the yen. The dollar had plummeted to an all-time low against the yen of Y76.25 in very early Asian trading but recovered to stabilise around Y79 on expectations the Bank of Japan would step into the market. The euro also sank to as low as Y106.60 but also clawed back most of its losses to trade at around Y110. But intervention had not materialized in European hours with most strategists arguing that such action is unlikely to happen ahead of the Group of Seven emergency conference call to discuss Japan at 2200 GMT. "The market will be worried all day that [the G-7] are going to come to some agreement that may lend the dollar some support against the yen," said Jane Foley senior currency strategist at Rabobank in London. "There is almost certainly going to be some degree of rhetoric and the risk of actual intervention has risen during the week," she added. Japanese economy minister Kaoru Yosano helped lay the groundwork for intervention, saying that speculative yen purchases in the European market were "groundless". Crucially, Finance Minister Yoshihiko Noda also said he was watching the market closely.
ASIA
The yen pulled back from record highs reached against the dollar earlier in the Asian session Thursday, as markets braced for potential intervention by the Japanese government to force the yen lower. Japanese Finance Minister Yoshihiko Noda said he is closely watching the yen given "nervous movements" and "speculations" in the market. Other Japanese officials also claimed the overnight spike in the yen was driven by speculators, not by repatriation flows in the wake of last Friday's devastating earthquake. However, while the greenback has recovered some its losses against the yen, there are concerns markets are yet to see to the end of the headline-driven panic. "The next few days will be crucial with the nuclear reactor situation," Mitsuru Sahara, a senior FX dealer at Bank of Tokyo-Mitsubishi UFJ, said. "If current efforts to cool the reactors fail and there are meltdowns, there could be panic early next week that would drive the dollar down below Y76 and possibly to Y75." The U.S. dollar plummeted to a record-low of Y76.250 in early Asia trade, but had nosed up to Y78.82 by late Thursday on expectations that the Bank of Japan might intervene. "At the moment, the market is front-running a possible intervention" by the Finance Ministry, said David Forrester, a currency strategist at Barclays Capital. "We think the yen is in a place where such intervention is warranted."
WORLD
The dollar hit its weakest ever level against the yen Wednesday in New York, as Japan's unfolding nuclear crisis prompted speculators to bet that heavy repatriation flows will likely be needed to respond to a deepening disaster. Overall, safe-haven currencies--paradoxically including the yen--soared in extremely volatile trading as traders took in new warnings about possible catastrophic events at Japan's crippled nuclear power plant. The dollar fell as low as Y79.22 according to EBS via CQG, falling below its previous low of Y79.75, hit in April 1995. The dramatic move prompted traders to warn that the likelihood of currency intervention by Japan to curb yen strength had increased sharply. Traders responded en masse to dire warnings from U.S. Energy Secretary Steven Chu who said he believed a "partial meltdown" occurred at the Japanese nuclear power plant damaged by explosions, malfunctions and radiation leaks following the earthquake. Chu added, however, that Japan's Fukushima Daiichi nuclear power plant has containment systems to prevent leaks and that a partial meltdown doesn't mean the "containment systems will fail." "That (caused) a bit of panic," said Paresh Upadhyaya, head of Americas G10 FX strategy at Bank of America Merrill Lynch.
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