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)