13 JUNE 2013: ASIAN MARKET PLUNGES WITH STRONGER YEN

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The Dollar plunged to its lowest level in ten weeks against JPY at 94.81, while the Asian stock markets experienced one of its worst one day down falls. All the Asian markets ended in red territory with the Japanese Nikkei 500 index falling as much as 5.3 %. Tumbling Japanese shares accelerated the fall of the Dollar as Nikkei- investors continued to unwind earlier hedges against a weaker Yen. The Dollar has lost 8.6 % since hitting a four year high of 103,74 on May 22.

The latest developments demonstrate the gamble involved in Central Bank’s monetary easing. Investors have snapped up Japanese shares between mid-November and May, as a weaker Yen promised to fatten exporter’s overseas revenues. Now a stronger Yen threatens to do the opposite, leading to further sell-offs in the Nikkei. The tumults in Asia come on top of uncertainty about whether the US Federal Reserve (FED) will pare back its stimulus program buying bonds and treasury bills. Japanese bond selling is adding to the pressure on the currency.

The fall in Asian shares followed a weak session in New York. Dow Jones Industrial was down 0.84 % while the technology heavy Nasdaq lost 1.06. The Dollar lost 0.3 % against a basket of currencies, DXY, ending at 80.741 after falling below 80.651, a level not seen since February. The Dollar has lost 4 % since its three-year high on May 25th. Adjustments in overextended long USD positions rather than a changing perception of US growth and Fed outlook, seems to be behind the weaker Dollar.

Weakness in the Dollar saw the Euro climb to a near four-month high of 1.3370. Euro/USD trades now at 1.3356. It is difficult to explain the stronger Euro, the recession in the Euro zone taken into account. Recent polls show, however, that a majority of analysts believe that ECB will keep the interest rate at the present level. Optimists are also suggesting that the euro zone will return to modest growth later this year.

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12 JUNE 2013: USD/JPY REBOUNDS AFTER STEEP FALL

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The Dollar steadied against the Yen on Wednesday, suffering its biggest drop in three years yesterday. USD/JPY trades at 96.44, sinking as low as 95.60 in the previous session. The 2.7 % fall marked the biggest one-day drop in the USD/JPY currency since May 2010. The Dollar continued to slip against the Euro at 1.3307. The Dollar index DXY steadied after slumping to a four-month low of 81.034. The weakened Australian Dollar gained 0.4% and trades 0.9469 to a USD.

Bank of Japan (BOJ) disappointed investors hoping for an extension in the maximum duration of its fixed-rate loans, similar to the European Central Bank (ECB) long term financing operation. Such extension would have been aimed at quelling the volatility in the bond market. The market expected such a move. When that did not happen, the Yen sellers had to liquidate short positions. Yen buying was strengthened by exporters shrinking purchases of the Dollar.

The volatility and tumult in the Japanese bond market have raised worries that it could undercut the Abe government and BOJ’s efforts of monetary easing. USD/JPY had, until the recent turnaround, fallen continuously from 80 to 103.65 Yen to a Dollar. The weaker Yen gave Japanese export a welcomed boost, but most of this advantage has been eaten by the stronger Yen experienced in June.

The US and European stock markets tumbled yesterday on nervousness over FED’s monetary easing exit strategy. Dow Jones and Nasdaq fell from 0.76 to 1.06 %. At the General Assembly of Facebook, CEO, Mark Zuckerberg, faced a barrage of questions about the stock price. Facebook’s shares have fallen 37% since its introduction. In Japan, the Nikkei index fell below 13.000 as the strong Yen dragged exporters down.

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07 JUNE 2013: DOLLAR PLUNGES IN BROAD SELL-OFF

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The Dollar plunged against the Euro, Japanese Yen, and other currencies as investors reduced bets on the greenback on concerns that today’s US jobs report will disappoint. Euro/USD trades at 1.3262. American stocks fell in tandem with a weaker USD, but rebounded to end in positive territory. Dow Jones added 0.53 % to climb back above the 15.000 level. Nasdaq gained 0.66 % to 3 424. The changes seem to be technically driven by psychological factors.

A poll amongst economists expects 170 000 new jobs could’ve been added to the US economy in May with an unemployment rate of 7.5 %. Fear of a weaker than expected job report prompted, however, investors to unwind bets on a stronger Dollar that had been profitable for months. Gold prices, which have been under strong pressure for months, suddenly rose 1 percent to USD 1412 an ounce as investors sold long positions on the Dollar.

The Euro gained after the European Central Bank, ECB, left interest rates unchanged. ECB President, Mario Draghi, stated that further monetary support was unlikely in the near future. ECB has kept interest rates at a record low of 0,5 % waiting for a turnaround in the Euro zone. Bank of England have also chosen to leave their loose monetary policy unchanged. British Sterling, GBP, has jumped against the Dollar at 1,5612 and gained substantially during the last few days from low 1.51 levels.

Concerns that key US job data will disappoint sent the Japanese Nikkei into bear territory in Asia this morning. The Nikkei plunged 1.9 % to a two month low. Nikkei has lost 20 % from a five-and-half-year high, just two weeks ago. Other Asian stocks failed to capitalize on overnight gains in Wall Street. The Asian Pacific MSCI-index fell 0.6 % to its lowest level since November. The fall in equities seem to indicate a stronger appetite among investors for safe haven bonds. The yield on U.S, German and Japanese bonds have risen recently.

Oil prices are higher on the back of a weaker Dollar. Brent crude trades close to USD 104 a barrel, up from the USD 100 mark earlier in the week.

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06 JUNE 2013: YEN JUMPS AS WALL STREET FALLS

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The Yen rose sharply early Thursday. USD/JPY dropped to 99.00, up more than one percent since yesterday. Commodity currencies are under strong pressure with the Australian Dollar at a 19-month low. The currency volatility follows a steep fall in US stocks Wednesday extending the previous days sell-off. Dow Jones dipped under 15.000 due to concerns that the US Federal Reserve, FED, may scale down its bond-buying stimulus when the economy is still sluggish.

The sell-off on Wall Street was broadly based with four decliners to one advancing stock. The selling might suggest that the seven-month stock rally is coming to an end. The S&P 500 has fallen 3.6 percent since its peak on May the 21st, one day before Ben Bernanke indicated that FED might taper its stimulus if economic data shows traction. The jobless numbers and unemployment statistics to be presented tomorrow are therefore crucial.

Both Dow Jones and Nasdaq registered their biggest percentage drops in six weeks. Most Asian markets suffered similar falls and slipped to fresh lows. Economic data has recently been mixed. Investors fear that FED will reduce their monetary easing before the economy is back on track, in spite of clear FED statements that the stimulus will continue until unemployment is reduced to 6.5 %. A report yesterday showed that private employers created far less jobs in May than the 160,000 predicted. The figures are a strong argument against changes.

The long term bullish outlook on the USD/JPY remains. Analysts don’t predict steeper falls from here and still see 120 as likely in 6 – 12 months. EUR/USD is resilient, reaching 1.3118 yesterday before falling back to 1.3095. The stronger Euro comes ahead of ECBs policy meeting. ECB will probably consider whether it is necessary to take fresh action in order to secure the expected recovery of the euro zone in the second half of 2013.

 

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03 JUNE 2013: ASIA FALLS ON PROFIT-TAKING

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Asian shares fall on profit taking Monday after recent highs. Uncertainty over how much longer the current US stimulus will continue, still dominates the agenda at the start of a new trading week.China’s last PMI figures (Purchasing Manager’s Index) published during the weekend, creates concern in light of softening domestic and external demands. More US-data this week might give a clue as to growth and demand prospects and will hopefully show some direction in regards to how long the monetary easing will last.

The dollar index rose last week on investors bets that improved data on the US economy would encourage the Federal Reserve (FED) to reduce monetary stimulus, which have boosted investments into riskier assets as emerging market currencies. The South African Rand, Mexican Peso and Hungarian Forint were hardest hit against the dollar in a volatile week in the currency market that saw investors reduce their exposure to risk-related assets.

The New Zealand Dollar fell more than any other developed currency after their Reserve Bank Governor stated that the Kiwi dollar still remained overvalued. Further currency interventions were thus needed to weaken the Kiwi.

The Euro/USD gained substantially last Thursday, but fell back due to the unemployment figures published on Friday. The unemployment rate in the Eurozone hit a fresh record high at 12.2 percent in April. Youth unemployment is reaching alarming levels. Euro/USD trades at 1.3013 in the morning. The President of the European Central Bank (ECB), Maro Draghi, said that the Eurozone economy is on track for a recovery driven by ECBs loose monetary policy, and outside demand.

Japanese Yen is up against USD at 00.48 amid a bout of profit-taking by investors last week. GBP is steady at 1.5217. Oil prices are under pressure, but Brent crude is still trading above USD 100 a barrel. Gold prices are slightly up at USD 1395.

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29 MAY 2013: USD RALLIES ON STRONG DATA

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US Dollar rallied against the Euro and Japanese Yen on strong consumer confidence, home prices accelerating to the highest levels seen in seven years. EURO/USD fell to 1.2874 while USD/JPY plunged to 102.58. Dow Jones jumped 92 points to 15.395 while the technology index Nasdaq added 0.62 %. The yield on US 10 years treasuries, simultaneously, reached a one year high.

After three losing sessions, global equity markets performed strongly. The Japanese Nikkei were up 1.3 % on Tuesday after a two day dramatic 10 percent plunge. All the European stock exchanges rose, UK being the strongest, with a 1.83 % increase. English and US markets were closed on Monday due to Memorial Day.

The equity rally came as central bankers in Germany and Japan confirmed their willingness to continue monetary easing. A German member of the European Central Bank (ECB) stated that the loose monetary policies would last for as long as it takes to get the Western European economy back on track. A representative from Bank of Japan issued a similar statement.

These strong statements will probably encourage more risk taking in higher yield assets financed through so called carry trading; cheap loans in Japanese Yen. While increased consumer confidence and higher home prices strengthen the USD, looser ECB monetary policies will lead to a weaker EURO/USD. A fall below the long traded interval,1.28 – 1.32, seems likely.

Japanese Yen is probably going to fall further as the short lived Yen rally indicates. The weakness in the Yen is there to be continued. Currency analysts are predicting within three months 106 Yen to the Dollar, and expect a further plunge to 109 within six months. Bottom levels are as low as 120 – 125 Yen a Dollar and seem likely in 2014.

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07 MAY 2013: BULLISH STOCK MARKETS SET FOR NEW RECORDS

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US and Asian stocks reached new record highs as the Japan’s Nikkei average soared 2,8 % on Tuesday morning. For the first time since June 2008 the Nikkei broke above 14 000 as the market played catch-up from an extended holiday. The strong US jobs data eased concern over the health of Japan’s biggest export market. Japanese exporters as Toyota, Honda and Sony led the rally jumping more than 3 %.
In the US the S& P led by Apple and financials pushed further above 1600. The S & P has gained 13,4 % since the beginning of the year. Decent earnings together monetary easing and low interests rates have helped the stock markets to new records. As long as the world’s leading central banks are providing markets with liquidity the stock rally is most likely going to continue at least in the short term.
Asia is today focusing on Australia where markets are waiting for the Central Bank of Australia’s decision on interest rate. Analysts are split on whether the interest rate would be lowered by a quarter point to a record low of 2,75 %. A jump in stock prices are then predicted. Australian stocks fall 0,4 % prior to the central bank’s verdict. The Asian Pacific, MSCI-index, was as the Korean Kospi slightly down after big upward jumps on Monday.
In the currency market the Euro is on the defensive Euro/USD trading at 1.3077. The head of the European Central Bank (ECB), Mario Draghi, stated yesterday that ECB is watching economic data and is ready to take further action if needed. The upcoming German elections in September make changes in the austerity policies unlikely in spite of Germany being under pressure from other EU-members.
While gold, USD 1465, is losing ground on continued outflows in holdings at the world’s largest gold backed exchange traded funds, SPDR Gold Trust, crude and copper are steady. Brent crude continues to trade above USD 105 a barrel.
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06 MAY 2013: US JOB REPORT EASES FEARS

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The US stock markets reached new highs on Friday. The S&P 500 index smashed through the 1600 mark for the first time in history. All 30 companies on the Dow Jones Industrial Average rose as that benchmark crossed 15 000 for the first time after better than expected jobs reports. Non-farm payrolls increased with 165 000 jobs in April. Analysts forecast was 140 000. The unemployment rate fell to 7,5%, the lowest level since December 2008. Asian stocks spurred higher Monday morning on the US job data.

The better than expected jobs report eased fears about the health of the world’s largest economy which remains on a path of modest, but resilient growth. The Federal Reserve (FED) indicated last week that it is prepared to increase the USD 185 Billion –a-month pace of its third round of quantitative easing. The new figures mean there is little chance for such an increase. The job creation in April was heavily weighted towards the service sector. The production side with construction was shedding 6000 jobs. There is also a dip in average weekly hours from 34,6 to 34,4.

The US job data follow central banks meetings last week. While the US FED expressed readiness to increase monetary easing, the European Central Bank (ECB) informed that if necessary it would consider taking deposit rates negative. The mere fact that the key central banks aired such an opportunity was enough to sustain the rally in stocks, bonds and credit demonstrated by the new records on Wall Street and the positive sentiments in Asia this morning. Decreasing rates meaning that stocks are the most attractive alternative investment.

Oil prices have also been given a boost by the US jobs reports. New York crude (NYMEX) is for the first time in weeks trading above USD 96 a barrel. Brent crude is at 104,50. Copper is in the limelight after a 6,5% rally to USD 7 270 on Friday. Copper has fallen nearly 20 percent in the past three months on worries of a slowing world economy. Japanese yen is falling against the dollar trading at 99,08 yen to a dollar. Euro/USD is at 1.3122.
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03 MAY 2013: ECB RATE CUTS SUPPORT SHARES

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EUR/USD lost more than 100 points after the European Central Bank (ECB) decided to cut interest rate with 0,25 % to a historical low of 0,50. The Euro fell immediately on the announcement and trades at 1.3074. The decision received cheers from stock markets which rallied in early Asian trade on Friday. In the US Wall street was helped by a sharp fall in last week’s jobless claims which fell to its lowest level in five years.

The smaller number of Americans seeking jobless benefits claims was seen as a sign of a healing job market in spite of the presentation a ray of weak economic data lately. US stocks were also helped by a narrowing trade gap in March. The fact that both imports and exports fell, indicate, however, weaker demand, and tells of weakening growth momentum both in the US and globally.

Initial claims for state unemployment benefits dropped with 18 000 last week to seasonally adjusted 324 000. The claims report runs counter to a number of signals of economic activity softening in March and April. The data has no direct bearing on the Labour Department’s monthly employment report which is expected later today. It suggests, however, that employers are feeling less pressure to lay off workers even if they have cut back on hiring.

Oil, copper and gold prices traded higher with Brent crude up 2 % to 102,65. The US stock rally was led by tech shares. Facebook delivered better than expected and rose 5 %. The ECB decision to cut rates for the first time in 10 months helped market sentiment and bolstered the content of the Federal Reserve (FED) statement Wednesday. FED will continue to buy bonds to keep interest low and spur growth. If necessary FED kept the door open for stepping up the purchases. Also the ECB kept options for further action to stimulate the economy.
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25 April 2013: Nikkei extends its sharp rally

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The Japanese Nikkei index extended previous session’s sharp rally in early trade on Thursday. USD/JPY is steady on 99,41 and continues to lick at the magic 100 level. Euro/USD is 1.3046 up 50 points from yesterday when the Euro dipped under 1,30. The week picture inside the Euro zone points towards European Central Bank (ECB) interest rate cut next week. Both New York (NYMEX) and Brent crude are up. Brent trades at 102.18. Gold jumps 20 dollars to 1447 an ounce in Asian trading.

The Japanese ally is driven by expectations that yen weakness will spur strong earnings for local firms. Nikkei is up 0,3% to 167,10. The Asian Pacific, MSCI-index is also up 0,3%, basically on the belief that weak global economic data will encourage central banks to keep their monetary easing economic stimulus policies. US durable goods orders for March were disappointing, and weighed in on the strength of the dollar which is weaker towards Euro, Yen and other major currencies.

The growing expectations for an ECB interest rate cut helped offset the growth concerns highlighted by US durable goods. Durable goods orders posted its biggest drop in seven months in March. Together with a survey highlighting increasing pessimism among German business leaders in April, future forecasts are bearish. The sentiment in Europe is somewhat strengthened by falling bond yields in indebted countries like Italy and Spain. A possible end to the two months political deadlock in Italy, has further strengthened. A 37 years old has been appointed new Premier and the tenure for their 87 years old President is prolonged.

The US government will on Friday present its report on gross domestic product, GDP. The report is expected to show that the economy grew at a 3% annual in the first quarter rebounding from a 0,4 % gain in the final three months of 2012. For the current quarter an expansion of 1,5% is expected. Raising oil and copper prices indicate a turn towards more positive market sentiment. Gold which fell to USD 1322 after losing 250 dollars in two days, have recovered strongly to 1447.

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