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Japanese Yen Sold on Currency Intervention Threat, BOJ Easing Rumor

Japanese Yen Sold on Currency Intervention Threat, BOJ Easing Rumor

2010-03-12 06:15:00
Ilya Spivak, Sr. Currency Strategist
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Key Overnight Developments

• New Zealand House Sales Flounder, Retailing Outperforms
Japanese Yen Sold on Intervention Threat, BOJ Easing Rumor



Critical Levels

03122010-1

The Euro traded higher, adding 0.1 percent against the US Dollar in overnight trade. The British Pound was little changed, oscillating in a choppy range around 1.5050 to the greenback. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.


Asia Session Highlights


03122010-2

The Japanese Yen traded lower against the spectrum of major currencies after Finance Minister Naoto Kan said the exchange rate “should be determined by markets” but currency intervention is always an option if prices move “too abruptly”. Prime Minister Yukio Hatoyama echoed the sentiment, saying the government can take “appropriate measures” in response to Yen strength. Sellers were further encouraged by a Bloomberg News story citing two anonymous sources inside the Bank of Japan that claimed policymakers will expand their 10 trillion yen bank lending program in a bid to further relax monetary conditions and fight deflation.

New Zealand Retail Sales added 0.8 percent in January, topping expectations of a 0.5 percent increase amid strong gains in fuel and car sales. Indeed, excluding auto-related goods, sales rose by a far more modest 0.3 percent, with gains driven by spending on recreational goods and hotel stays. Looking at the overall trend in retail activity, sales gained 2.3 percent in the 12 months from January 2009 marking the third consecutive increase in the annual growth rate. Receipts may suffer a setback going forward however after a metric of consumer confidence from ANZ National Bank and Roy Morgan Research dropped 7.8 percent in February.

A separate report showed that New Zealand House Sales fell 3.8 percent in the year to February – the largest drop in a year – according to the Real Estate Institute of New Zealand (REINZ). Sale prices rose at an annual pace of 6.1 percent, the slowest in five months, while the median number of days to complete a transaction rose to the highest in at least as long at 46 days. Weakness in the housing market further underscores lackluster consumer confidence, with New Zealanders’ perception of current and future economic conditions clearly not good enough to take on big-ticket purchases.


Euro Session: What to Expect

03122010-3

The economic calendar is decidedly tame in European hours, with Euro Zone Industrial Production figures being the lone item of significance on the docket. Expectations call for output to rise 0.7 percent in January, trimming the annual pace of contraction to the lowest in 17 months at -1.6 percent. Manufacturing staged a recovery through much of 2009 after plunging to record lows amid the global recession of the previous year on the back of over $2 trillion in worldwide stimulus efforts and buoyant Asian demand, particularly from China. However, it remains to be seen if output can stay supported after the flow of government cash dries up while China steps up efforts to clamp down on lending in a bid to contain the Asian giant’s growth amid fears of overheating after the annual inflation rate hit a 16-month high of 2.7 percent last month. Indeed, a figures released by the Customs General Administration this week showed that exports to China from Germany – the Euro Zone’s industrial hub and its largest economy – fell to the lowest in nine months in February.


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