Dollar Halts a 5-Day Advance Versus Yen; Taiwan’s Currency Falls

 

The dollar weakened against the yen, ending a five-day advance, amid speculation its recent climb was too rapid.

 

The greenback pared declines after fewer Americans than forecast filed applications for unemployment benefits last week. The dollar has advanced at least 4 percent against all its 16 major counterparts this year and extended gains yesterday after a report showed the world’s biggest economy grew at the fastest pace in more than a decade. Taiwan’s dollar slid to a four-year low. The ruble gained a fourth day.

 

“We might track around these 120 yen-type levels for a little while,” said Steven Barrow, head of Group of 10 foreign-exchange research at Standard Bank Plc in London. “Longer term, dollar-yen is moving higher. 150 is a realistic two-year target. There may be, as we’ve been seeing in this Christmas period, quite a bit of volatility up and down.”

 

The dollar declined 0.2 percent to 120.46 yen at 9:57 a.m. New York time after rising to 120.83 yen yesterday, the highest since Dec. 9. It gained 3.7 percent during the five-day streak. The U.S. currency weakened 0.2 percent to $1.2192 per euro after touching $1.2165 yesterday, the strongest level since August 2012. The yen was little changed at 146.88 per euro.

 

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, has risen 11 percent this year, set for the biggest annual gain in data starting in December 2004. It slipped 0.2 percent to 1,130.75 today.

 

The index’s 14-day relative-strength index reached 71 yesterday, above the 70 level some traders see as a signal an asset may have declined too far, too fast and is due to reverse course. It was at 68 today.

Unbeatable Dollar

The greenback is headed for gains against all of its 16 major peers this year for the first time since 2000.

 

Declines range from the Singapore dollar’s 4.5 percent drop to the 19 percent plunge by the krone of Norway, as lower oil prices weighed on the economic outlook for Western Europe’s largest crude producer. The yen fell 13 percent and the euro lost 11 percent.

 

Taiwan’s dollar slid to a four-year low versus the greenback today as overseas investors sold $2 billion more Taiwan stocks than they bought this month, set for the biggest outflow since June last year.

 

The currency weakened 0.2 percent to NT$31.815 per U.S. dollar after reaching NT$31.894, the least since September 2010.

Ruble Gains

The ruble gained even after Standard & Poor’s said it’s considering cutting Russia’s credit rating to junk. Hours earlier, lawmakers pushed through legislation to allow the government to bail out struggling lenders.

 

The ruble rose 0.4 percent to 54.26 per dollar after reaching 80.10 on Dec. 16, the weakest level on record.

 

Russia’s currency has still dropped 8.3 percent this month, the most against the dollar among 174 foreign-exchange values, followed by the krone’s 6 percent depreciation. Libya’s dinar leads gainers with a 9 percent climb, while the Somali shilling added 6.1 percent.

 

Even as the euro gained today, it headed for a sixth month of losses against the dollar amid speculation the European Central Bank is moving toward boosting currency-depreciating stimulus to revive growth.

 

“The euro will weaken especially against the dollar as a result of additional easing,” said Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. in New York. “More and more people are expecting the ECB to start buying sovereign bonds.”

Economic Recovery

In contrast, the Federal Reserve is moving toward raising interest rates for the first time since 2006 as the U.S. economic recovery strengthens.

 

Jobless claims dropped by 9,000 to 280,000 in the week ended Dec. 20, the fewest since early November, from 289,000 in the prior period, a Labor Department report showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg called for 290,000.

 

A report yesterday showed U.S. gross domestic product grew at a 5 percent annual rate from July through September, the biggest advance since the third quarter of 2003.

 

“The theme in the past few weeks has been dollar strength,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., said in a phone interview from New York. The dollar weakened today as “investors are overlooking the data -- we’re seeing some small position-squaring ahead of the holiday.”

 

Sources: Bloomberg (24 Dec 2014)

Forex News – Dollar Approaches 5-Year High on Fed Rate View; Ruble Rebounds

A gauge of the dollar rose toward a five-year high after Federal Reserve Chair Janet Yellen indicated the central bank is on pace to increase interest rates as early as April.

 

The greenback gained for a second day against the yen after Fed officials yesterday replaced a pledge to keep borrowing costs near zero for a “considerable time,” and held the rate at zero to 0.25 percent, where it’s been since 2008. Russia’s ruble snapped a seven-day drop as the finance ministry said it was selling reserves to counter a plunge that sent the currency to a record amid a slide in oil prices.

 

“The Fed meeting clarified that rate hikes will start by mid-next year, giving a big boost to the dollar,” said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp. in New York. “The Fed indicated that the decline in oil will boost spending more than hurt inflation.”

 

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, rose 0.1 percent to 1,122.19 at 9:27 a.m. in Tokyo from yesterday, when it strengthened 0.9 percent. It closed at 1,122.34 on Dec. 5, the highest since March 2009.

 

The dollar rose 0.2 percent to 118.84 yen, after surging 1.9 percent yesterday, the biggest gain since October. The U.S. currency was little changed at $1.2328 per euro following yesterday’s 1.4 percent advance. The yen slipped 0.1 percent to 146.51 per euro.

 

Source: Bloomberg (18 Dec 2014)

Forex News – Yen Retreats From Four-Week High Before Fed; N.Z. Dollar Slides

The yen retreated from the strongest in four weeks against the dollar before the Federal Reserve concludes a two-day policy meeting today.

 

The yen has been the biggest gainer among the 10-currency Bloomberg Correlation-Weighted Indexes in the past week as tumbling oil prices added to concern the global economy will falter, boosting demand for havens. The ruble collapsed to a record yesterday even after Russia increased borrowing costs to the most since 1998. A gauge of emerging-market currencies fell to a 12-year low. New Zealand’s kiwi declined after the South Pacific nation’s current-account deficit widened.

 

“Looking toward the FOMC, it’s creating a bit of a cross current — the market may be more reluctant to sell the dollar-yen now than it may have been yesterday,” said Greg Gibbs, the head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore, referring to the Federal Open Market Committee. The greenback “remains basically in a nervous state, caught somewhere between 115 and 119” yen.

 

The yen dropped 0.3 percent to 116.74 per dollar at 12:05 p.m. in Tokyo from yesterday, when it touched 115.57, the strongest since Nov. 17. Japan’s currency slid 0.2 percent to 145.93 per euro after advancing 1.6 percent in the previous two sessions. The dollar was little changed at $1.2501 per euro.

 

West Texas Intermediate crude slid as much as 4.1 percent to $53.60 a barrel in New York, the least since May 2009, before trading at $54.70. The United Arab Emirates said the Organization of Petroleum Exporting Countries won’t cut production even if prices fall as low as $40 a barrel.

Source: Bloomberg

Oil Plunges Below $60 a Barrel

On 10^th December, the 12-member OPEC group predicted that the demand for crude oil will drop next year by about 300,000 barrels a day to 28.9 million, the least since 2003.

 

That sentence caused Brent futures to slide as much as 2.5 percent in London, coming close to $60 a barrel. Brent for January settlement declined as much as $1.57 to $60.28 a barrel on the London-based ICE Futures Europe exchange and was at $61.16 at 12:30pm Sydney time. The more active February future was 71 cents lower at $61.44.

 

US oil fell to $56 a barrel on Monday morning, extending its decline from the lowest level in more than five years. The United Arab Emirates has said that OPEC will resist output cuts even if prices slump as low as $40.

 

West Texas Intermediate for January delivery dropped as much as 2.7 percent, to $56.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract decreased $2.14 to $57.81 last Friday, the lowest since May 2009. Prices are down 42 percent this year.

 

In the interim, the International Energy Agency has reduced its 2015 demand forecast for the fourth time in five months amid rising supply from non-OPEC countries. Oil has lost more than 20 percent since OPEC decided at a meeting in Vienna last month to maintain its production target, resisting calls from members including Venezuela to cut output.

 

Drillers in the US, pumping crude at the highest rate in more than three decades, idled the most rigs in almost two years as prices sank further.

 

OPEC, which supplies about 40 percent of the world’s oil, pumped 30.56 million barrels a day in November, exceeding its target for a sixth straight month, a Bloomberg survey showed.

 

Along with oil, prices of iron ore has been one of the hardest hit as well. The price of the material used to make steel has almost halved this year and slumped to a five-year low of USD68.49 a ton last month.

 

Australia has estimated that iron ore will trade at about USD60 a metric ton as the largest mining companies press on with expanding supply, deepening a glut just as demand growth in China falters.

Iron ore currently accounts for about 20 percent of Australia’s export income, and government revenue is expected to be A$7 billion lower this fiscal year due to the sharp drop in commodity prices. The Australian dollar has fallen more than 10 percent since the start of September as the price of the steel-making material declined.

Top News This Week

Europe: German Flash Manufacturing PMI. Tuesday, 16^th December, 4.30pm.              
I expect figures to come in above 50.1 (previous figure was 49.5).

UK: CPI y/y. Tuesday, 16^th December, 5.30pm.              
I expect figures to come in at 1.5% (previous figure was 1.6%).

Canada: Manufacturing Sales m/m. Tuesday, 16^th December, 9.30pm.              
I expect figures to come in at -0.3% (previous figure was 2.1%).

Trade Call

Long USD/CAD at 1.1538

On the H1 chart, prices on USD/CAD have failed to rally to a higher high, signaling a pause in the upward momentum. I expect prices to retrace another 30-40 pips downwards as traders take profit on slumping oil prices.

 

With the negative data expected to come out from Canada this week, I expect the uptrend on USD/CAD to continue. An entry is taken at 1.1538 at the support level. A stop loss of 35 pips is placed below the previous low and we will have two targets on this trade, exiting the first position at 1.1573 and the second one at 1.1608.

 

Entry Price = 1.1538
Stop Loss = 1.1503
1st Profit = 1.1573
2nd Profit = 1.1608

 

Sources: (As written on BTInvest, 15 December 2014.)

 

Note: The information in this article has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This article is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this information.

 

US Non-Farm Payrolls Record Blow-out Number

Employers in the U.S. added 321,000 jobs in November, the most since January 2012, driving wage gains and highlighting increased corporate confidence the economy will endure a weakening in global markets.

 

According to figures from the US Labour Department, the advance in payrolls exceeded the most optimistic projection in a Bloomberg survey of economists and followed a 243,000 gain in October that was stronger than previously reported. The jobless rate held at a six-year low of 5.8 percent. Average hourly earnings rose 0.4 percent, the biggest gain since June of last year.

 

The USD/JPY shot up over 100 pips immediately after the blowout number was reported. On Monday morning, USD/JPY rose to 121.84, touching its highest level since July 2007. The MSCI Asia Pacific Index added 0.1 percent by 9:25 a.m. in Tokyo, as Japan’s Topix Index rose 0.4 percent to extend its highest level since December 2007.

 

Elsewhere in Europe, European Central Bank (ECB) President Mario Draghi has promised that the ECB will act should current stimulus prove insufficient when it is reassessed early next year. The central bank is said to be preparing a QE package to be discussed at the next monetary policy meeting on 22^nd January 2015.

 

On 11^th December, banks are expected to borrow about 148 billion euros in the targeted long term refinancing operation (TLTRO), according to the median estimate in the survey of 24 analysts. Predictions ranged from 90 billion euros to as much as 250 billion euros. An initial round of the program in September raised 82.6 billion euros, less than economists forecast.

 

The TLTRO, designed to spur lending to the real economy, will mature in September 2018 and will have a fixed interest rate, which is the refinancing rate at the time of take-up plus 10 basis point spread. After December, additional amounts can be borrowed in further target LTROs during the period from March 2015 to June 2016, depending on the evolution of the banks’ eligible lending activities in excess of bank-specific benchmarks.

 

A low take-up rate in December would make the prospect of actual sovereign bond QE in early 2015 more likely. Draghi’s plan to boost the ECB’s balance sheet toward early-2012 levels, when it was about 3 trillion euros compared with 2 trillion euros now, is aimed at ensuring the euro area is flooded with cash, keeping real interest rates low and spurring credit creation that can revive the economy.

 

As well as the long-term loans, it’s also fueled by purchases of covered bonds and asset-backed securities.

 

Since those private-sector asset purchases started in late October, the ECB’s balance sheet has barely budged as liquidity injections are countered by repayments on the older loans. In fact, between now and February 2015, banks must repay 270 billion euros of outstanding loans issued at the end of 2011 to alleviate the effects of the euro area’s sovereign debt crisis.

 

Covered-bond purchases totaled 17.8 billion euros as of 28^th November, and buying of asset-backed securities (ABS), which started late last month, reached 368 million euros.

 

The problem in all of the ECB’s moves thus far is that the 18-nation economy has also shown little sign of improvement. Inflation matched a five-year low at 0.3 percent in November and the ECB last week cut its forecasts for consumer prices and gross domestic product through 2016.

Top News This Week

UK: Manufacturing Production m/m. Tuesday, 9^th December, 5.30pm.              
I expect figures to come in at 0.2% (previous figure was 0.4%).

China: CPI y/y. Wednesday, 10^th December, 9.30am.              
I expect figures to come in at 1.5% (previous figure was 1.6%).

Australia: Employment Change. Thursday, 11^th December, 8.30am.              
I expect figures to come in below 16K (previous figure was 24.1K).

Trade Call

Short EUR/USD at 1.2276

On the H1 chart, there was a “short squeeze” last week when prices retraced upwards to hit 1.2456. The main reason was due to Draghi’s refusal to commit to QE this year. Some traders saw that as a reason to take profit on the short EUR/USD, causing the EUR/USD to have a push upwards.
However, the EUR/USD short trades have returned almost immediately, especially after the blowout number from Friday’s NFP. An aggressive entry is taken at 1.2276 once prices hit the support level. A stop loss of 35 pips is placed above the previous high and we will have two targets on this trade, exiting the first position at 1.2241 and the second one at 1.2206.

Entry Price = 1.2276
Stop Loss = 1.2311
1st Profit = 1.2241
2nd Profit = 1.2206

Sources: (As written on BTInvest, 08 December 2014.)

 

Note: The information in this article has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This article is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this information.

Forex News – Aussie Slumps Toward Record Nine-Day Losing Streak as Yen Gains

Australia’s dollar weakened for a ninth day and New Zealand’s fell for a third as a slide in commodity prices damped the outlook for nations that rely on sales of raw materials.

 

The yen strengthened versus all except one of its 16 major counterparts as a decline in Asian stocks revived demand for the currency as a haven. The Aussie extended its daily losing streak to the longest since it was allowed to float freely in 1983 as a gauge of business sentiment fell to the lowest since last year’s election. China’s yuan weakened to a four-month low.

 

“The Aussie is leading losses in commodity currencies with oil declining as a slowdown in global economy reduces demand,” said Junichi Ishikawa, an analyst at IG Markets in Tokyo. “Gains in the greenback against its Australian peer are spreading to the dollar-yen cross rate as well.”

 

Australia’s dollar fell 0.7 percent to 82.33 U.S. cents as of 2:46 p.m. in Tokyo, having tumbled 3.7 percent during its nine-day decline. The Aussie earlier dropped to 82.24 cents, the weakest since June 2010. New Zealand’s currency slipped 0.3 percent to 76.27 cents.

 

The yen gained 0.4 percent to 120.22 per dollar after strengthening 0.6 percent yesterday. Japan’s currency advanced 0.4 percent to 148.11 per euro. The U.S. dollar was little changed at $1.2320 per euro.

 

Source: Bloomberg (09 Dec 2014)

Forex News – Dollar Approaches 120 Yen on U.S. Outlook; Euro Weak Before ECB

The dollar rose to within 0.1 percent of 120 yen, a level unseen since July 2007, as forecasts that the U.S. economy’s jobs growth maintained momentum contrasted with a recession in Japan.

 

The euro was near a two-year low reached yesterday before the European Central Bank meets today as investors speculated about the timing of additional stimulus. Australia’s dollar fell to a four-year low, extending its slide to a sixth day, after data yesterday showed the pace of economic growth unexpectedly slowed.

 

“It’s still the divergent-growth, divergent-policy story,” said Robert Sinche, a global strategist at Amherst Pierpont Securities LLC in Stamford, Connecticut. “We are seeing capital flows out of Japan, and I think that helps bring capital out and continues this movement down in the yen.”

 

The dollar rose 0.1 percent to 119.87 yen at 9:04 a.m. in Tokyo from yesterday, after earlier reaching a seven-year high of 119.90. The euro was little changed at $1.2312 after falling to $1.2301 yesterday, the lowest since August 2012. The single currency bought 147.60 yen from 147.48 in New York.

 

The Aussie fell 0.1 percent to 83.95 U.S. cents after dropping as low as 83.86, a level unseen since July 2010.

 

Source: Bloomberg (04 Dec 2014)

Forex News – Dollar Rises to 7-Year High Versus Yen as Aussie Slides on GDP

The dollar strengthened to a seven-year high against the yen before U.S. data this week that economists say will back the case for higher interest rates as Japan and Europe ease policy.

 

The greenback was 0.2 percent from its strongest in two years against the euro before the European Central Bank meets tomorrow. Australia’s currency slid to a four-year low after a report showed economic growth was less than forecast. New Zealand’s dollar weakened following a drop in milk prices at an auction. Federal Reserve Vice Chairman Stanley Fischer said yesterday low oil prices are a boon to the U.S. economy.

 

“The market has been paying attention to comments by Fed officials that lower energy prices are a plus for the U.S. recovery,” said Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank in New York. “That optimism over the economic outlook is fueling dollar buying.”

 

The dollar rose 0.2 percent to 119.39 yen at 11:45 a.m. in Tokyo from yesterday, after reaching 119.44, the highest since August 2007. It was at $1.2387 per euro from $1.2383 in New York. The greenback touched $1.2358 on Nov. 7, the strongest since August 2012. The euro traded at 147.88 yen from 147.63.

 

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 trading partners, was little changed at 1,111.39 from yesterday, when it closed at the highest level since March 2009. The gauge has risen 9 percent in 2014, heading for its best year since Bloomberg started compiling the data in 2004.

 

Source: Bloomberg (03 Dec 2014)

“Save Our Swiss Gold” Rejected

The Swiss voted against the “Save Our Swiss Gold” proposal last weekend.

 

The proposal that required SNB to hold at least 20 percent of its assets in gold has been rejected by a majority of 77%. SNB said it was “pleased to hear” of the result and “The SNB will continue to enforce the minimum exchange rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities,” in their statement.

 

The immediate market response to the outcome of the referendum is spot Gold opening at 1159 lower than last Friday’s closing of 1168. The EUR/CHF opened slightly higher at 1.2035 too, compared to Friday’s closing. SNB had set a floor of 1.20 for the EUR/CHF exchange rate 3 years ago. With the prospect of further stimulus by the ECB, it could exert pressure on the EUR/CHF and may prompt the SNB to intervene in order to defend the 1.20 level. Besides direct intervention in the currency market, setting negative interest rates is one of the options available to SNB.

 

The outcome of the Swiss Referendum marks the beginning of an eventful week. With 4 central banks, ECB, BOE, BOC & RBA due to release their statements and US announcing their key manufacturing and employment data, we can expect the currency market to be pretty volatile this week.

 

ECB will release their official statement on 4^th Dec. The recent decision by OPEC to continue with their production caused the oil price to drop to a 5-year low. This has presented a challenge to ECB in their bid to raise the inflation in the Euro zone. This may prompt ECB to decide on more aggressive easing. On the other hand, ECB Vice President Vitor Constancio said that the best time to evaluate the effect of the current stimulus is Q1 2015.

 

If ECB announces on more aggressive easing on 4^th Dec, we can expect the Euro to weaken further. However, if ECB decides to remain status quo until Q1 2015, we may see a short term rally in the Euro.

 

Last week’s Thanksgiving Day presented an insight to consumer spending in US. The traditional Thanksgiving Black Friday weekend is famous for long queues and crazy spending.  According to the National Retail Federation (NRF), spending fell to $50.9 billion as compared to $57.4 billion in 2013. The number of shoppers came in at 133.7 million, more than 6 million lesser than the 140.1 million expected by NRF.

 

Although the figures may present a “not-so-optimistic” picture of the consumer spending, we have to look at the upcoming spending figures in December to give us a clearer view. It is important to look at the November and December figures because they account for 19% of total annual revenue of the retailers.

 

Besides retail spending data, the upcoming employment data is something to look out for as well. If the data is weaker than market consensus. Market is likely to price in delay in rate hike by the Fed again

Top News This Week

Australia: Cash Rate. Tuesday, 2^nd December, 11.30am.              
I expect figures to remain at 2.5% (previous figure was 2.5%)

.

Europe: Minimum Bid Rate. Thursday, 4^th December, 8.45pm.              
I expect figures to remain at 0.05% (previous figure was 0.05%).

 

US: Non-farm Employment Change. Friday, 5^th December, 9.30pm.              
I expect figures to come in at 222K (previous figure was 214K).

 

Trade Call

 

 

 

 

 

 

 

 

 

 

 

 

Long EUR/CHF at 1.2060

On the daily chart, EUR/CHF is hovering around 20 plus pips away from the 1.20 level and the immediate resistance around 1.2050 level. SNB has vouched to hold the 1.20 level.  If the upcoming ECB press conference announces further easing, it may put pressure on the EUR/CHF to test the 1.20 level, thereby prompting SNB to take action to weaken CHF.

I expect prices to hover between 1.2000 and 1.2050.  A pending order with entry at 1.2060 is placed in anticipation of any intervention by SNB.  A stop loss of 70 pips is placed below the 1.20 level.  We will have two targets on this trade, exiting the first position at 1.2130 and the second one at 1.2200.

Entry Price = 1.2060
Stop Loss = 1.1990
1st Profit = 1.2130
2nd Profit = 1.2200

 

Sources: (As written on BTInvest, 01 December 2014.)

 

Note: The information in this article has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This article is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this information.

Forex News – Australian Dollar Falls to 4-Year Low After Swiss Gold Decision

Australia’s dollar slid to a four-year low on speculation demand for the nation’s gold will wane after voters in Switzerland rejected a referendum to force the Swiss National Bank to hold more of the metal.

The Aussie and the New Zealand dollar fell against major counterparts before data forecast to show manufacturing slowed in China, the biggest trading partner of both South Pacific nations. The Reserve Bank of Australia sets policy tomorrow. Australia is the world’s largest gold producer after China.

“Gold is an important driver of the Aussie dollar,” said Raiko Shareef, a markets analyst at Bank of New Zealand Ltd. in Wellington. “Sentiment is quite fragile in Aussie right now given what’s happening in metals generally.”

Australia’s dollar dropped 0.8 percent to 84.37 U.S. cents as of 8:59 a.m. in Tokyo, after touching 84.27 cents, the least since July 2010. New Zealand’s currency slid 0.6 percent to 77.93 U.S. cents. The Aussie and kiwi fell for a third day.

The greenback rose 0.2 percent to 118.88 yen. It was little changed at $1.2436 per euro. The single currency added 0.1 percent to 147.82 yen. The Swiss franc weakened 0.3 percent to 96.79 centimes per dollar.

The “Save Our Swiss Gold” proposal stipulating the Swiss National Bank hold at least 20 percent of its balance sheet in gold and never sell any bullion was voted down by 77 percent to 23 percent, the government said. Polls had forecast the initiative’s rejection.

Source: Bloomberg (01 Dec 2014)

Forex News – Yuan Trade Surge Shows Hong Kong Role Intact, HKMA Chan Says

The daily average turnover of Hong Kong’s real-time yuan payments system has doubled to 800 billion yuan in October, from 400 billion yuan a day in 2013, Chan said. The city’s savings in the Chinese currency totaled 944.5 billion yuan by the end of September, according to HKMA data. With the central bank due to release last month’s deposit figures later today, Chan said the total is yet to reach 1 trillion yuan.

 

The currency in Hong Kong fell 0.37 percent this week, the most since the five days ended Oct. 3, after China cut benchmark interest rates for the first time since 2012. It traded at 6.1561 per dollar as of 10:19 a.m. local time.

 

Hong Kong has assigned all of its quota to invest yuan in China’s onshore financial markets and Chan said the HKMA’s request for a higher limit received a “positive response” from the State Administration of Foreign Exchange in meetings yesterday.

 

Hong Kong has 270 billion yuan of allocations under the Renminbi Qualified Foreign Institutional Investor program, the world’s largest, according to data compiled by Bloomberg. The U.K., Singapore, France, South Korea, Germany, Qatar, Canada and Australia have 500 billion yuan of quota in total.

Source: Bloomberg (28 Nov 2014)

Forex News – Aussie Near 4-Year Low After RBA’s Lowe Says Currency May Weaken

Australia’s dollar traded 0.3 percent from a four-year low after central bank Deputy Governor Philip Lowe said yesterday the currency will probably depreciate in line with commodity export prices.

The yen was near the weakest level in seven years against the U.S. dollar as Bank of Japan board member Sayuri Shirai said she supported the central bank’s additional monetary stimulus last month. The U.S. dollar was little changed against most of its major peers before a report economists said will show durable goods slid for a third month.

 

“Weaker commodity prices and the possibility that the interest-rate differential could narrow between the U.S. and Australia, with the Fed looking to raise interest rates next year, have been pointing to a weaker Australian dollar for some time,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. who attended the Australian Business Economists’ annual dinner yesterday where Lowe spoke.

 

Australia’s dollar traded at 85.38 U.S. cents as of 12:02 p.m. in Tokyo from 85.30 cents yesterday, when it touched 85.14 cents, the least since July 2010.

 

The yen gained 0.1 percent to 117.85 per dollar, after touching 118.98 on Nov. 20, the weakest since August 2007. The euro was little changed at $1.2469. The single currency bought 146.95 yen from 147.17.

 

Source: Bloomberg (26 Nov 2014)

Forex News – Yen Rebounds as Drop Seen Overdone; Kuroda Says Japan on Track

The yen rebounded from near a seven-year low versus the dollar amid signs its decline had become overstretched and as Bank of Japan Governor Haruhiko Kuroda said the economy is on track to achieving policy makers’ 2 percent inflation target.

 

Japan’s currency rose against all major peers as a gauge of momentum signaled its drop versus the greenback since the end of last month has been too much, too soon. The BOJ surprised markets on Oct. 31 by expanding monetary stimulus, two days after the Fed ended its bond-buying program. New Zealand’s dollar held its first decline in three days before a quarterly Reserve Bank survey of inflation expectations.

 

The yen gained 0.2 percent to 118.02 per dollar at 10:20 a.m. in Tokyo from yesterday, when it fell 0.4 percent. It reached 118.98 on Nov. 20, the weakest since August 2007. The yen jumped 0.3 percent to 146.70 per euro, after yesterday’s 0.8 percent slide. The euro traded at $1.2432 from $1.2442.

 

Kuroda said in a speech in Nagoya today that core consumer-price gains are likely to reach 2 percent in or around the fiscal year starting next April, and that efforts to end Japan’s deflationary mindset are progressing.

 

The BOJ last month lifted the annual target for enlarging the monetary base to 80 trillion yen ($680 billion), from 60 trillion yen to 70 trillion yen. The policy board voted to retain the plan at the end of a two-day meeting on Nov. 19.

 

The yen’s 14-day relative-strength index versus the dollar was at 24, and has been below the 30 line that signals to some traders that an asset is oversold every day since Oct. 31.

 

Source: Bloomberg (25 Nov 2014)

What it is the longterm outlook for the Yen?

With the recent surprise decision of Bank of Japan to expand what was already an unprecedentedly large monetary-stimulus program have sent the yen tumbling. Governor Haruhiko Kuroda and his team voted to raise the BOJ’s annual target for enlarging the monetary base to 80 trillion yen ($724 billion), up from 60 ~ 70 trillion yen. With his words of “doing whatever it takes” to meet the inflation target of 2 percent , the outlook for yen remains in the downside.

 

Moreover, the prelim GDP figures release at the start of this week had failed the expectations of 0.5% and churned out -0.4%. Thus sending the 3rd largest economy into recession with two quarters of GDP decline.

 

With the current state of the economy  too weak to undergo another round of tax hike, Shinzo Abe – prime minister of Japan has decided to delay the sales tax hike which was scheduled on October 2015. Following news that the country had slipped into a recession. He said he wanted voters to approve his decision to postpone a scheduled increase in the national sales tax, which he said would have slowed the economy further. Upon the kicking in of the expanding monetary base, the expectation for the Yen to remain bearish is persist.

Forex News – Rupiah Strengthens Most in Three Weeks After Fuel Prices Raised

Indonesia’s rupiah rose the most in three weeks and shares advanced after President Joko Widodo raised subsidized fuel prices, freeing up funds for capital spending in an economy growing at the slowest pace since 2009.

The price of gasoline was increased by 2,000 rupiah ($0.16) a liter to 8,500 rupiah and that of diesel to 7,500 rupiah a liter from 5,500 rupiah, Widodo said at a press conference late yesterday in Jakarta. Prior to the increase, Indonesia had earmarked 276 trillion rupiah for fuel subsidies in the 2015 budget, or 13.5 percent of expenditure.

The rupiah strengthened 0.6 percent, the most since Oct. 29, to 12,138 per dollar as of 9:20 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. Twelve-month non-deliverable forwards traded offshore rose 0.7 percent to 12,167, 0.2 percent weaker than the spot rate. Bank Indonesia set a fixing used to settle the contracts at 12,193 yesterday and will publish today’s rate at 10 a.m. local time.

“The freed-up funds can be potentially used in other avenues, particularly infrastructure spending and capital works, which can really boost the longer-term economic growth outlook,” said Jonathan Cavenagh, a foreign-exchange strategist at Westpac Banking Corp. in Singapore. Speculation that Bank Indonesia will raise interest rates at a special meeting today is also supporting the currency, he said.

The central bank will hold an unscheduled monetary policy review today, spokesman Peter Jacobs said. The benchmark interest rate has been held at 7.5 percent since November 2013 following 1.75 percentage points of increases last year.

Source: Bloomberg (18 Nov 2014)

Forex News – Yen Falls to 7-Year Low on Election-Stimulus Speculation

The yen touched a seven-year low against the dollar after a report showed Japan’s economy unexpectedly shrank for a second quarter.

 

Japan’s currency extended a four-week rout as the gross domestic product data added to speculation Prime Minister Shinzo Abe will delay a planned increase in the sales tax and call a general election. New Zealand’s dollar gained for a fifth day, the longest winning streak since May, after a report showed retail sales increased more than economists estimated. Australia’s currency rose to the highest this month before an expected free-trade agreement with China, the nation’s biggest export market.

 

“It is an overwhelmingly negative report and certainly confirms the market’s idea that the sales tax will be pushed back significantly,” said Raiko Shareef, a Wellington-based markets analyst at Bank of New Zealand Ltd.

 

The yen tumbled as much as 0.7 percent to 117.05 per dollar, the weakest since October 2007, before trading at 116.42 as of 9:11 a.m. in Tokyo from 116.29 on Nov. 14. Japan’s currency slid 0.3 percent to 146.08 per euro.

 

The 18-nation euro was little changed at $1.2537 from last week. New Zealand’s kiwi rose 0.4 percent to 79.38 U.S. cents. Australia’s currency was at 87.58 U.S. cents after earlier touching 87.82, the highest since Oct. 31.

 

Source: Bloomberg (17 Nov 2014)

Forex News – Dallas Fed Says President Fisher Will Retire on March 19

The Federal Reserve Bank of Dallas said President Richard Fisher will step down on March 19, making him the second district chief and voting policy maker this year to announce his retirement from the central bank.

 

The reserve bank said it has hired the executive search firm Heidrick & Struggles International Inc. to conduct a search for a new president, according to an e-mailed statement today. Fisher, 65, is a former deputy U.S. trade representative who’s served as president since April 2005. He had previously announced that he would retire by April 30.

 

“We intend to consider a broad and diverse group of candidates from inside and outside of the Federal Reserve System,” Dallas Fed Chairman Mike Ullman said in the release. “Richard will be sorely missed.”

 

Fisher will join Philadelphia’s Charles Plosser, 66, in exiting the central bank after serving this year as voters on the policy-setting Federal Open Market Committee. Both have been consistent critics of the Fed’s unprecedented policy actions, and each cast dissenting hawkish votes against the September policy statement. Fisher said it didn’t reflect the strenghtening economy and the improved labor market outlook.

 

The FOMC has 12 voting seats. Eight of those are reserved for the bank’s board of governors and the president of the New York Fed. The presidents of the other 11 regional banks rotate through four remaining spots on an annual basis.

 

Fed Chair Janet Yellen, who took office in February, has just one more meeting Dec. 16-17 with the current FOMC roster before the annual rotation brings on new voters. Next year brings a dove, Charles Evans of Chicago; dovish-leaning John Williams of San Francisco; one consistent hawk, Richmond’s Jeffrey Lacker; and centrist Dennis Lockhart of Atlanta.

 

Source: Bloomberg (14 Nov 2014)

Forex News – Yen Near Seven-Year Low Amid Speculation Abe to Call Election

 

The yen traded 0.5 percent from a seven-year low amid speculation Japanese Prime Minister Shinzo Abe will call a general election to shore up support and postpone a planned sales-tax increase.

 

The yen reached 116.10 per dollar this week, the least since October 2007, after a ruling Liberal Democratic Party lawmaker said preparations for a snap election have begun. It rebounded yesterday after Finance Minister Taro Aso downplayed the possibility of a delay in raising the levy. The euro held a loss before German data forecast to confirm consumer prices fell last month. The Aussie traded near the highest in a week before Chinese data on retail sales and industrial production.

 

“The market has taken the idea of a delay in raising the sales tax as a positive, so stocks have been bought and dollar-yen has risen,” said Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. in New York. “Once we get an actual announcement, there’s a good chance we’ll see a further reaction in the market.”

 

The yen traded at 115.52 per dollar as of 11:10 a.m. in Tokyo from 115.49 yesterday, when it rose 0.3 percent. It slid 0.1 percent to 143.80 per euro. The shared currency was at $1.2448, after declining 0.3 percent in New York to $1.2438.

 

Australia’s dollar traded at 87.31 U.S. cents from 87.19 yesterday, when it touched 87.45, the most since Nov. 5. New Zealand’s dollar fetched 78.83 U.S. cents after gaining 1.7 percent in the last two days to 78.79.

 

Source: Bloomberg  (13 Nov 2014)

Forex News – Yen Set for 7-Year Low on Speculation Abe to Delay Tax Increase

The yen traded 0.3 percent from a seven-year low versus the dollar on speculation Japanese Prime Minister Shinzo Abe is considering dissolving parliament before postponing a planned sales-tax increase.

 

The yen fell the most among 10 major currencies in the past month after policy makers surprised investors with further currency-depreciating stimulus from the Bank of Japan and pension reforms that allow more money to flow abroad. The euro, Australian and New Zealand dollars were little changed against the greenback after rising by at least 0.6 percent yesterday.

 

“The chances of a delay to the sales tax hike and an early election in Japan are rising, which is a plus for stocks, and in that risk-positive environment, the yen will fall and the dollar will rise,” said Yujiro Goto, a currency strategist in London at Nomura Holdings Inc. “I don’t foresee any change in the underlying trend for a weak yen and strong dollar.”

 

The yen was little changed at 115.74 per dollar as of 9:39 a.m. Tokyo time, after yesterday touching 116.10, the weakest level since October 2007. Japan’s currency gained 0.1 percent to 144.25 per euro. The 18-nation common currency was little changed after advancing 0.4 percent to $1.2475 in New York.

 

Japan’s currency has fallen 6 percent in the past month, the most among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes.

 

Abe has decided to hold an election next month and postpone a planned sales tax increase to April 2017, the Sankei newspaper reported today, citing unidentified officials.

 

Abe said in Beijing he hasn’t decided anything about the timing of an election and that he couldn’t comment on exchange rates as prime minister. Liberal Democratic Party lawmaker Hiroyoshi Sasagawa said in an interview that preparations have begun, though only Abe can call a general election.

 

Source: Bloomberg (12 Nov 2014)

China’s Inflation In Line With Expectations

On Monday morning, the National Bureau of Statistics in China reported that the Consumer Price Index (CPI) remained unchanged at an annual rate of 1.6 percent from the preceding month. The figure was in line with the median estimate of 38 economists polled by Bloomberg.

 

Late last week, China reported that overseas shipments rose by 11.6 percent in October from a year earlier, beating the 10.6 percent climb predicted by economists in a Bloomberg survey. Imports, however, expanded 4.6 percent, down from growth of 7 percent in September and trailing the 5 percent increase projected by analysts. Exports rose 15.3 percent in September.

 

With the Asia-Pacific Economic Cooperation (APEC) Summit in focus, most eyes are on China, as the Summit is held in Beijing. Speaking to executives at a CEO gathering in Beijing recently, President Xi Jinping outlined that outbound investment will total USD1.25 trillion over the next 10 years. Calling a slowdown part of the new normal in China, Xi said his government is weaning the economy from a dependence on exports and infrastructure and making domestic consumption the key growth engine. He said the country expects to import over USD10 trillion of goods over the next five years – a further benefit to China’s partners.

 

For most market watchers, it is not difficult to see that President Xi is pushing the Free Trade Area of the Asia-Pacific in response to the US-backed Trans-Pacific Partnership, which excludes China.

 

In the US, the dollar extended losses against major and emerging-market peers in Asia after US non-farm payrolls data stoked speculation that the Federal Reserve will keep interest rates lower for longer. US employers added 214,000 workers to payrolls in October, holding above 200,000 for a ninth straight month though trailing the 235,000 increase projected by economists. The jobless rate fell to a six-year low, coming in at 5.8 percent.

 

The Fed ended its third round of bond purchases in October, citing economic gains. While the US economy has strengthened, with gross domestic product expanding at an annualised 3.5 percent rate in the third quarter, inflation indicators have remained low. The Fed funds rate remains in the zero to 0.25 percent range.

 

Gold continues to drop as hedge funds made their biggest cut of the year in bullish gold wagers as prices tumbled to the lowest since 2010. The net-long position in gold fell by 25,226 contracts to 45,072 futures and options in the week ended 4^th November, according to data from the US Commodity Futures Trading Commission (CFTC). Long holdings tumbled 12 percent, the biggest drop since December 2012.

 

Assets in the SPDR Gold Trust, the biggest bullion ETF, dropped 1.9 percent last week, a third straight decline. Investors sold 14.4 metric tons of bullion held through exchange-traded products last week, trimming assets to the least since August 2009. Gold has so far dropped 15 percent from this year’s high in March 2014. There’s a chance that gold will drop to USD1,000 an ounce by the end of the year as the cost of oil tumbles, although purchases in Asia (most notably India and China) will help to support prices a little.

Top News This Week

Canada: Manufacturing Sales m/m. Friday, 14^th November, 9.30pm.              
I expect figures to come in at 1.3% (previous figure was -3.3%).

USA: Retail Sales m/m. Friday, 14^th November, 9.30pm.              
I expect figures to come in at 0.2% (previous figure was -0.3%).

Trade Call

Short EUR/USD at 1.2500

On the H1 chart, EUR/USD is retracing into a range after a 400 pip fall since 29^th October. The divergent monetary policies between the Fed and the European Central Bank are still in play. There is still room for the euro to weaken as the ECB continues its QE.

An entry is taken at the round number of 1.25 and a stop loss of 40 pips ias placed above the previous high. We will have two targets on this trade, exiting the first position at 1.2460 and the second one at 1.2420.

Entry Price = 1.2500
Stop Loss = 1.2540
1st Profit = 1.2460
2nd Profit = 1.2420

 

Sources: (As written on BTInvest, 10 November 2014.)

 

Note: The information in this article has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This article is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this information.

 

 

 

RBA Kept the Cash Rate At 2.5% Unchanged

The RBA decided to leave the cash rate unchanged at 2.5 per cent.

 

Growth in the global economy is continuing at a moderate pace. China’s growth has generally been in line with policymakers’ objectives, though weakening property markets present a challenge in the near term. Commodity prices in historical terms remain high, but some of those important to Australia have declined further in recent months.

 

Volatility in some financial markets has picked up over the past couple of months. Overall, however, financial conditions remain very accommodative. Long-term interest rates and risk spreads remain very low. Markets still appear to be attaching a low probability to any rise in global interest rates or other adverse event over the period ahead.

 

In Australia, most data are consistent with moderate growth in the economy. Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend for the next several quarters.

Forex News – Dollar Set for Biggest Weekly Gain in 16 Months Before Jobs Data

A gauge of the dollar was poised for its biggest weekly gain in more than 16 months before a U.S. government report today forecast to show October payrolls expanded by more than this year’s average.

 

The Bloomberg Dollar Spot Index climbed to a 5 1/2-year high. The U.S. currency remained above 115 yen for a second day, trading 0.3 percent from a seven-year peak after Bank of Japan Governor Haruhiko Kuroda said this week the central bank will continue easing as long as needed to achieve stable 2 percent inflation. The euro held near a two-year low after European Central Bank President Mario Draghi deepened his commitment to stimulus yesterday. Australia’s currency was set for its first weekly drop in five weeks.

 

“Should we see a positive payrolls report in line with our forecast, the dollar should rise,” said Takeru Kurokawa, an analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services. “We could see dollar climb toward 117 yen.”

 

The dollar traded at 115.17 yen as of 9:24 a.m. in Tokyo, after touching 115.52 yesterday, the highest since November 2007.

 

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed at 1,097.88, set for the highest close since April 2009. The index has advanced 1.6 percent this week, the biggest gain since the period ended June 21, 2013.

 

The dollar was little changed at $1.2381 versus the euro after touching $1.2365 yesterday, its strongest level since August 2012. Europe’s shared currency was unchanged at 142.57 yen, having strengthened to a 10-month high on Nov. 6.

 

U.S. employers added 235,000 workers in October, according to a Bloomberg News survey of analysts before today’s Labor Department report. This year’s average is 226,670. Economists predict the jobless rate held at 5.9 percent, the lowest since July 2008.

 

Australia’s dollar was little changed at 85.66 U.S. cents after sliding to 85.53, its weakest level since July 2010. The Aussie was set for a 2.7 percent slide since Oct. 31, the first weekly decline since the period ended Oct. 3.

 

Source: Bloomberg (07 Nov 2014 )

Forex News – Yen Declines to Seven-Year Low Beyond 115 Per Dollar

The yen strengthened from a seven-year low as trading patterns signaled the Japanese currency’s drop beyond 115 per dollar has been excessive.

 

The yen’s 14-day relative strength index sank to 20 at the start of the week, and remains below the 30 level that’s deemed by some traders to indicate that an asset is oversold. The dollar headed for a third weekly advance before a U.S. report tomorrow that economists say will show employers hired workers at a faster pace in October than this year’s average. The euro strengthened against the dollar before the European Central Bank sets policy today.

 

“It’s not surprising that we pivot around these key big-figure levels like 115,” Mitul Kotecha, head of Asia-Pacific foreign-exchange strategy at Barclays Plc in Singapore, said in reference to the dollar-yen rate. “These are levels that might trigger a lot of profit taking or options barriers.”

Source: Bloomberg  (06 Nov 2014)

Forex News – Kiwi Extends Advance as New Zealand’s Employment Growth Quickens

New Zealand’s dollar added to its biggest gain in three weeks after a government report showed the nation’s jobs increased more than economists forecast.

 

The kiwi dollar appreciated versus all but one of its 16 major counterparts as faster jobs growth could add upward pressure on wages and price inflation in coming quarters. The euro held its steepest advance against the dollar in three weeks amid speculation the European Central Bank won’t announce additional stimulus after policy makers meet tomorrow.

 

“There is a Goldilocks economy story going on in New Zealand,” Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “We had a lot of employment growth but not much wage price inflation. Things are going quite well in New Zealand and that’s why we’ve seen the kiwi dollar up.”

 

The New Zealand dollar led gainers versus the U.S. currency, rising 0.2 percent to 78.23 U.S. cents at 9:26 a.m. in Tokyo after climbing 1.2 percent yesterday. Australia’s dollar was little changed at 87.37 U.S. cents.

 

The euro was also little changed at $1.2551 after climbing 0.5 percent to $1.2546 yesterday. It traded at 142.57 yen from 142.53. Japan’s currency held gains at 113.59 per dollar after strengthening 0.4 percent in New York.

Source: Bloomberg (05 Nov 2014)

Global Markets Respond to Stimulus

Last week was an exciting one for traders.

 

Mid-week, the Federal Reserve withdrew its final stimulus as expected, causing the US dollar to strengthen. The monthly bond purchases which stood at USD85 billion in December 2013 was scaled back by USD10 billion each in the last eight meetings. On 30^th October, the Fed removed the final USD15 billion from the market.

 

This marks the end of the Fed’s latest round of quantitative easing which began in January 2013. It has amassed a total of USD790 billion of Treasuries and USD813 billion of mortgage-backed securities. An improvement in the US labour market was cited as one of the main reasons for ending the quantitative easing program in October.

 

Data last week in the US showed the world’s largest economy grew an annualised 3.5 percent in the third quarter, beating the 3 percent increase in gross domestic product predicted by economists. Fewer Americans filed applications for unemployment benefits in the past month than at any time in more than 14 years, a separate report showed.

 

While all attention was focused on the Fed and the US dollar last week, the Bank of Japan (BOJ) sprang a surprise by easing its monetary policy. It released a statement on 31^st October saying they would raise the expanding the monetary base to 80 trillion yen, up from the previous figure of about 60 trillion to 70 trillion yen. Governor Haruhiko Kuroda also led the board to decide to triple the pace of purchases of exchange-traded funds and Japanese real estate trusts.

 

The announcement came just hours after Japan’s Government Pension Investment Fund said that it would put half its holdings in local and foreign stocks and start investing in alternative assets. The announcement caused the Topix to surge the most in 16 months and the yen to fall to 112.97 against the dollar, a level not seen in almost eight years.

 

Amidst the divergent policies between the US and Japan, Gold seems to have lost ground. Spot gold touched USD1161 at the end of last week, it’s lowest intraday price since July 2010. The precious metal dropped 4.7 percent last week to cap a second straight monthly loss. Societe Generale SA and Goldman Sachs Group Inc. are among the banks expecting further losses for gold.

 

Gold is heading for the first consecutive annual retreat since 2000 as prices are 2.8 percent lower this year after a 28 percent slump in 2013. Bullion fell last year as the Fed prepared to end bond-buying and holdings in exchange-traded products contracted.

 

So here’s a snapshot: The US stock market is up as the US dollar strengthens. The Japanese stock market is up as the Japanese yen weakens. Gold is down as the divergent policies between US and Japan become clearer.

Top News This Week

Australia: Retail Sales m/m. Tuesday, 4^th November, 8.30am.             
Expect figures to come in at 0.3% (previous figure was 0.1%).

USA: ISM Non-Manufacturing PMI. Wednesday, 5^th November, 11pm.             
Expect figures to come in below 58.4 (previous figure was 58.6).

USA: Non-Farm Payrolls. Friday, 7^th November, 9.30pm.              
Expect figures to come in below 230K (previous figure was 248K).

Trade Call

Long USD/JPY at 112.05

On the H1 chart, USD/JPY has shot up over 300 pips due to the BOJ’s monetary easing. I expect some traders to take profit on the “Long USD/JPY trade” this week, which would cause a momentary retracement from its current position. We will enter for a long again to follow the uptrend.

An entry is taken at 112.05 after the pullback. A stop loss of 50 pips is placed and we will have two targets on this trade, exiting the first position at 112.55 and the second one at 113.05.

Entry Price = 112.05
Stop Loss = 111.55
1st Profit = 112.55
2nd Profit = 113.05

 

Sources: (As written on BTInvest, 03 November 2014.)

 

Note: The information in this article has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This article is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this information.

Yen Forecasters Rethink Pace of Drop as Kuroda Shocks Again

Bank of Japan Governor Haruhiko Kuroda is forcing analysts to think hard about the speed of projected yen declines after he surprised markets for a second time with monetary stimulus.

 

The yen tumbled as much as 2.5 percent to a six-year low of 111.89 per dollar after the BOJ increased its goal for annual monetary base expansion to 80 trillion yen ($720 billion) from 60 to 70 trillion yen previously. That surpassed the median forecast among analysts surveyed by Bloomberg News for the currency to reach 111 at the end of March, and approached the 112 predicted for the end of June.

 

The yen is set for the biggest decline since April 4, 2013, when Kuroda announced the start of unprecedented stimulus to trigger 2 percent inflation in two years. Facing projections for failure in reaching the target on time, Kuroda said today the central bank was aiming to pre-empt any risk of a delay in ending Japan’s “deflationary mindset.”

 

“The BOJ has dropped another stimulus bombshell,” said Daisaku Ueno, Tokyo-based chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “It’s quite possible the yen will drop to 112 or 113 per dollar by the end of the year, or even 115.”

 

“It might be a good time to change our view,” he said, after previously predicting a weakening beyond 110 next year.

 

The yen tumbled 2.4 percent to 111.84 per dollar at 8:42 a.m. in New York. The currency is down 5.8 percent this year.

 

Only three of 32 economists in a Bloomberg survey this month predicted the BOJ would increase stimulus at its meeting today. A further 19 forecast action at a later date, while 10 foresaw no increase.

Slowing Inflation

“The interesting thing is the Fed became more hawkish than expected this week and the sense was maybe the BOJ will remain relatively neutral,” Neil Jones, the head of hedge-fund sales at Mizuho Bank Ltd. in London, said by phone. “This has accentuated the sovereign divergence as a major force in markets. The price action tells you it’s a major surprise.”

 

Jones reduced his fourth-quarter forecast for the yen to weaken to 115 per dollar, from 110. Mizuho cuts its forecast to 113 from 112, he said.

 

Today’s decision came hours after a government report showed that core inflation eased to the slowest pace in six months in September. Stripped of the effect of a sales-tax increase in April, core inflation -- the BOJ’s key measure -- was 1 percent.

 

“They were increasingly under pressure to do something,” said David Forrester, Singapore-based senior vice president for Group of 10 foreign-exchange strategy at Macquarie Group Ltd., who says it’s “possible” the yen will reach 114 per dollar sooner than his forecast for the end of March. “It is a pretty big game changer, and we do expect it to weigh significantly further on the yen.”

 

Sources: Bloomberg (31 Oct 2014)