17 JUNE 2013: DOLLAR LOSES MOMENTUM

The Japanese Yen held near a two-month high against the Dollar and the Euro in early Asian trade Monday, amid market hysteria and confusion over when and how the US Federal Reserve (FED) will begin to scale down its massive stimulus program. USD/JPY opened at the same level as it ended in New York on Friday, where the Dollar bought 94.23 Yen. Since the opening, Yen has weakened to 94.77. EUR/USD trades steady at 1.3322 as French President Holland’s Socialist party asks for a weaker Euro.

The Dollar lost momentum during volatile sessions last week, which saw sharp moves in the Yen and emerging market currencies. Stronger retail sales and lower weekly jobless claims released last Thursday, helped the green back rise from months of lows. Negative consumer confidence figures published on Friday effected, however, USD negatively. The Dollar index, weighed against a basket of currencies, are at a four month low. Both Euro and GBP are at their strongest level against the Dollar since February.

Oil prices rallied to a two month high after Washington’s announcement that it would provide arms to Syrian rebel groups. New York Crude, NYMEX, trades at USD 97.63 a barrel and Brent is above 105. The Syrian crisis going to be at the top of the agenda when the G-8 meets today. The Syrian civil war is threatening the stability in neighboring Countries such as Jordan, Iraq, Lebanon and Turkey, and challenges Israel’s security as well. The conflict threatens to develop into a regional Russia/US proxy war also directly involving Iran.

In a price analysis Barclay’s bank is forecasting crude oil prices to retrace to USD 111 a barrel, taking supply shortfalls as well as geopolitical tensions into consideration. The Bank estimates supply shortfalls from OPEC (Organization of Oil Producing Countries) to be 2 million barrels a day or equal to Germany’s oil imports. Libyan oil output has fallen below 1m barrels a day due to protests at oil fields and terminals. Nigeria’s output has fallen due to theft-related damage to pipelines.

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12 JUNE 2013: USD/JPY REBOUNDS AFTER STEEP FALL

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

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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29 MAY 2013: USD RALLIES ON STRONG DATA

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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22 MAY 2013: BERNANKE HOLDS THE KEY TO THE STRENGTH OF THE USD

Global markets traded steadily yesterday building up to the publishing of the Federal Reserve’s minutes from the last BOD meeting in April/May, and Ben Bernanke’s statement to Congress later today.  After a small correction on Tuesday, the USD continues to strengthen and is up close to record high against a basket of currencies, DXY.

As proven over the last few weeks, the overall trend in the USD is pointing up towards all currency pairs in spite of a day or two of declines.  This trend is supported by three main factors;  the forecast for the US is better than for any other economy, Europe is ridden with recession and Japan is concentrating its efforts on increasing the inflation to the 2 % target.

The upswing in the US economy is mainly due to its monetary easing and FED's loose monetary policies. FED representatives have, over the last few days, indicated that the bond buying program will soon come to an end. If Bernanke “sneezes” today and states the same as his local FED representatives have done, it would mean a further strengthening of the USD.

A weaker Euro and Yen over the last few hours seem to indicate that this is what markets expect.  After the Japanese Economy minister talked the Yen up earlier in the week,  he seems to have been reprimanded by superiors, and the Yen continues its free fall. The International Monetary Fund, IMF, in a report today, urged Swiss authorities to weaken the Franc by unwinding its currency reserve funds. The Franc has already depreciated 3,7 % towards the Euro in 2013.

Precious metals continue to fluctuate, wildly searching for direction.  The large increases in gold and silver throughout Asia and early European trade was quickly eaten by new steep falls. Oil prices keep steady. Smaller than expected English inflation strengthened GBP and gave the markets hopes for loser monetary policies, meaning more money printed by the Bank of England.

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14 March 2013: Retail report boosts DOW to new high

Surprisingly strong retail sales helped the Dow Jones Industrial to rise for the ninth straight session in a stock rally not seen since 1996. The new record high posted for DOW is 14 455. Also Nasdaq edged higher to 3 245. Trading volume was light with investors consolidating positions after a strong run up in the three first months of the year. Sign of strength in the economy and the Federal Reserve’s (FED) monetary easing have accelerated the advance of US equities, but many investors are asking whether we are in for a technical correction. The retail sales report helped underscore the impression that the economy is gaining momentum.

Asian shares fell for the second day in row with regional factors outweighing the positive sentiments from another Wall Street record close. The MSCI-index for Asia-Pacific was down 0,6%. Australia plunged 1% in spite of positive employment numbers. The Australian dollar reacted positive to the employment news and hit a five-week high. The Japanese Nikkei bucked the negative trend and added 0,4%. Net inflows in Japanese mutual funds reached USD 11 billion in February. A domestic stock rally for the last four months have increased investor’s appetite for Japanese stocks.

Monetary policy direction remains diverse in Asia as countries also watch development in Chinese economy and North Korea closely. Japan wants powerful monetary easing to get out of a vicious deflation spiral harming its economy for two decades. Other central bankers are fearful of inflation. South Korea has been holding the interest rate steady at 2,75% for the last half year.

The Australian dollar jumped to USD 1,0383 after employment soared by 71 000 in February. JPY continues to gain strengthen against USD trading at 96,03 down from its 96,71 peak on Tuesday. Euro/JPY has also retreated from its record high on Tuesday. The brighter forecast for the US economy has negatively affected the Euro trading down to 1,2947. The yield on Italian short and long term bonds increased during yesterday’s auction, the first after the rating agency Fitch downgraded Italy’s credit rating in February. Investor’s attention will today turn to the Spanish bond auction.

Oil prices, gold and silver have dropped since yesterday. NYMEX crude trades at USD 92,28 a barrel. Brent crude is down to 108,40. Gold trades at USD 1586 an ounce.

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13 March 2013: Fear of triple dip recession puts GBP under pressure

Fears of a triple-dip recession put new downward pressure on British Sterling (GBP) yesterday. January data showed a surprise fall in British industrial output. This pushed GBP down to a low level of $1.482. USD/GBP has since recovered and trades 0,2% to 1.4933. The state of the British economy is highly questionable. Some analysts are waiting an even weaker British sterling, and expect to see that USD/GBP can fall as low as 1.35.

Asian shares fell on Wednesday as the recent stock rally run seems to run out of steam. The MSCI index for Asia-Pacific outside Japan fell 0,6%. Stocks in Australia, Hong Kong and mainland China also fell from 0,6 to 1%. The Dow Jones Industrial, however, posted a new record high rising for the eight straight day on Tuesday. European shares retreated just short of fresh 4-and-a-half year high. Some investors fear that stocks have risen, too, quickly without fundamental support. Investors might be more risk willing, but are still scared by past events as the financial crisis in 2008 where fingers were burnt.

USD/JPY which fell to a low of 96,71 yesterday, trades today at 95,87 reflecting fears that the yen has fallen, too, steeply. The Nikkei stock index retreated 0,5% on profit taking after the last days strong rally; boosting exporters taking advantage of a weaker yen.

Euro/USD is steady in the interval between 1,3030 and 1.3040. It was weighed down on Tuesday by a warning from the Chairman of the Bundesbank, Jens Weidmann, who is also on the board of ECB, the European Central Bank. Weidmann stated that euro crisis in no way is over. In other developments drought has put the New Zealand agricultural dependent currency under pressure.

NYMEX crude is up to USD 92,71 a barrel while Brent crude is weaker at 109,64. Gold, silver and copper are all up 0,2% clinging to gains earlier in the week. Gold trades at USD 1592.

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12 March 2013: Asian stocks higher on record Wall Street

Wall Street’s record close overnight bolstered most Asian shares on Tuesday. Growing confidence in the US economy underpinned investors risk appetite. The Japanese yen slipped to fresh lows on speculation over imminent monetary easing. USD/JPY stands at a new low of 96,51. JPY is losing ground also against Euro and Australian dollar. Euro/USD is trading at 1.3027.

The US stock indexes extended its winning streak to seven sessions and touched its highest intraday level since October 2007. Dow Jones closed at a record high 14 447. The MSCI-index for Asia-Pacific also continued up led by financials echoing US trading where finance were the best performing sector. Also Australia, Hong Kong and Shanghai were up as the Japanese Nikkei. The weaker yen is giving exporters a welcomed boost and Nikkei was up for the eight day in row.

The dollar index, DXY, has benefited from last week’s strong labor data, and continues to jump against the yen. Analysts stress that dollar/yen may take a pause in the second quarter when seasonal weaknesses typically slow US economic indicators. They see a possible USD/JPY downside on 92 yen to a dollar with strong technical support around the 90 level. For now the trend is clearly towards a continued weaker yen.

Euro/USD is steady at 1.3030 level. The Euro is under pressure from Italy’s inconclusive last month elections which are weighing in and delaying the country’s fiscal reform efforts. Gold has edged to 1583 marginally up from yesterday. In new York US crude, NYMEX, traded up 0,2% at USD 92,21 a barrel. Brent crude trades up from below 110 to USD 110,20 a barrel.

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11 March 2013: US-Dollar keeps the upper hand

The USD keeps the upper hand in the currencies markets and continue to gain both against a currency basket and major currencies as Euro, GBP and JPY. USD/JPY traded at 96,10 – a 3-and-a-half year high following surprisingly strong USD labor data on Friday. US employers added a more-than-expected 236 000 workers to their payrolls in February. The jobless rate fell to a four year low of 7,7%.

There is still a way to go before the unemployment numbers reach the 6,5% target set by the Federal Reserve (FED) and monetary easing is reconsidered. Before this target is obtained the US economy must produce more than 200 000 monthly jobs for the next three consecutive months. The strong February data has, however, created a momentum and new optimism that the US economy finally is turning and lying the financial crisis from the autumn 2008 behind.

Risk appetite was, however, curbed by a mixed bag of economic data from China painting a patchy recovery in the world’s second-largest economy. The data signaled a looming dilemma for policymakers, as inflation stood at a 10 month high in February. Factory output and consumer spending were weaker than forecast. The data caught commodity prices between growing optimism of increased consumption and a stronger dollar. Non-dollar holders are buying dollar-denominated commodities.

In Asia the MSCI-index for Asia-Pacific was up 0,1% while Shanghai fell 0,3%. The Dow Jones industrial average posted its fourth consecutive record high on Friday. European shares also jumped on the strong US labor data. The strength of the dollar is also a reflection of more fundamental money flows out of the yen and euro. These developments nudge the dollar higher. Currency speculators are boosting their bets in favor of USD and raised their short positions in most other currencies as yen, pound sterling GBP and Euro. Oil and precious metal prices keep steady.

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04 March 2013: Asia tumbles on China worry

 Asian  shares slipped on  Monday as China tightened its grip on the property sector. Beijing increased Friday  required down payments and loan rates for buyers for second homes in cities where prices have been quickly  increasing  in an effort to contain housing costs. This had immediately a negative effect on the Chinese markets and led to a tumble in Asia. The MSCI-index for ASIA-Pacific shares are 1,3 % down after Shanghai shares slipped 2,3 %.

 Slower growth in  Chinese increasingly important services sector had also an impact. The growth in this sector was slower than in five months, reinforcing the view that the Chinese recovery remains modest. The slower Chinese growth had an immediate effect on Australia where the AXJO index fell 1.2 %. Japan was the only positive spot.  The Nikkei 225rose 0,6 % as the sole gainer in the region. Export companies were boosted by a weaker yen and surprisingly strong US manufacturing and consumer sentiment.

 The new Governor of Bank of Japan (BOJ) stated that BOJ is ready to take whatever measures necessary to get Japan out of the vicious deflation circle. USD/JPY trades at 93,33. In spite of its budget problems USD is trading on a six months high against a basket of currencies. Currency speculators have over the last week increased their bets in favour of the US dollar.

 Evidence of Europe’s problem with Spain at risk needing a state bailout is weighing in on the Euro.  Data presented on Friday showed that Germany and Ireland are the only Euro zone members with factory output growth last month. Joblessness within the Euro zone rose to an all-time high. The Euro steadied at 1.3015 after slipping to a low of 1.2966 on Friday, the lowest level seen in 3 months.

 Concerns about the negative impact from the USA spending cuts also weighed in on US crude which is down to USD 90.59 a barrel. Brent is trading at 110,50. Gold and silver prices are hurt by the strong dollar.

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01 March 2013: Euro fall steadies in Asian trade

The Euro steadied in Asian trade Friday morning after steep losses yesterday and after notching its biggest monthly fall – 4% - against the dollar in nine months. This as investors digested slightly disappointing Chinese data, political uncertainty in Italy and impending US government spending cuts. These combined factors sapped investor’s risk appetite and put the Euro under increased pressure.

China’s official purchasing managers’ index for February showed manufacturing activity at its slowest pace in four months at 50.1 against the predicted consensus poll of 50,2 slightly lower than expected. The data is not dramatic. Risk-off sentiment doesn't usually help the Euro, but the Chinese data is not a major factor. The unclear situation in Italy is the basic worry. Euro/USD is trading at 1.3073 well above the 1.3018 hit earlier in the week. The European Central Bank (ECB) will consider interest rates today. A further cut will put the Euro under new pressure.

The Japanese yen was relatively steady against both Euro and USD. USD/JPY trades at 92.64. The yen which usually is regarded as a safe haven in times of heightened market stress, continue to under perform after Prime Minister Shinzo Abe nominated an advocate of aggressive growth and stimulus policy to head the Bank of Japan.

The big worry in global markets is nevertheless how the sweeping US budget cuts worth USD 85 billion starting from this month, will hit growth in the world’s biggest and the global economy. The International Monetary Fund (IMF) has warned that the cuts would hit US biggest trading partners especially hard. In Washington the blame game between Republicans and Democrats are in full swing with both parties accusing each other for failure to prevent the fiscal crisis.

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28 February 2013: Bernanke and data lift Wall Street

Stocks rose on Wednesday with major indexes posting their best daily gains since early January, as Federal Reserve Chairman, Ben Bernanke, gave robust support for continued stimulus policy and data pointed to modest economic improvement. In his second day before a Congressional committee, Bernanke defended FED’s buying of bonds to keep interest rates low to boost growth. Bernanke’s comments helped market rebound from its worst decline since November. Dow Jones Industrial closed at a level not seen since 2007.

A relatively smooth auction of Italian government bonds further helped temper concerns about the country’s political deadlock. The Euro held its ground against both dollar and Japanese yen on Thursday. The common currency edged up 0,1% to USD 1.3147 after steep losses following the Italian elections. The Euro hit an eight-week low on 1.3018 on Tuesday. Solid sales of Italian government bonds yesterday helped soothe the jitters that the political deadlock could destabilize Europe’s second biggest sovereign debt market.

Strong US business spending data also boosted investors’ sentiment easing worries about looming US fiscal spending cuts and prompting the yen to resume its decent after a brief spell of sharp gains earlier in the week. In Washington positions between President Barack Obama and congressional leaders over the budget crisis hardened yesterday as last ditch talks to prevent harsh automatic spending cuts beginning March 1st, failed to make substantial progress.

British sterling (GBP) is still weak trading at 1.5169 against the dollar. The Australian dollar is stronger and oil has regained some ground. Brent crude is trading above USD 112 a barrel. Also gold is somewhat stronger trading close to the critical USD 1600 level an ounce.

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