The Forex Daily Digest – September 30, 2009
The USD gained a little ground against other major currencies yesterday, particularly the JPY after that nation’s Finance Minister hinted at the possibility of “intervention” to slow any further increase in the yen. U.S. gold futures fell slightly in choppy trading as a USD increase encouraged bullion investors to lock in their profits, but strong technical support should keep gold from falling even more.
Japan's new finance minister, Hirohisa Fujii, has upset the foreign exchange markets this week. First with comments that suggested he was content with recent JPY strength but then he appeared to backpedal a bit. Fujii said the government may act to stabilize the foreign- exchange market but denied that he supported a stronger yen; a day after the currency hit an eight-month high. His comments initially helped move the JPY to 8-month highs against the USD but it has since given up those gains.
Toyoo Gyohten, President of the Institute for International Monetary Affairs, said that Japan’s government should support the U.S. dollar’s status as the world’s reserve currency. Gyohten’s comments suggest that the Democratic Party of Japan, a party that came to power for the first time this month, may continue the policy line of the former government by supporting the dollar’s authority while continuing to buy U.S. government debt.
The USD also saw some gains versus the EUR as Russia said it will maintain a share of U.S. Treasuries in its international currency reserves, reducing concern that central banks will diversify away from the U.S. dollar. The CAD also lost some ground against the USD as crude oil fell and an interest rate cut by the Russian central bank sparked concern that a global recovery could falter. Bank Rossii First Deputy Chairman said that Russia will avoid diversifying into the AUD and CAD because of liquidity concerns.
Meantime, Canada's minority Conservative government gained the temporary support of an opposition party this week and is poised to survive a no-confidence vote in Parliament later this week. The vote will come before Parliament debates draft legislation to boost jobless benefits by about C$1 billion ($920 million) -- a measure that the left-leaning New Democratic Party has long demanded.
The AUD gained against the USD and the NZD recouped earlier losses as an increase in global stocks encouraged investor demand for higher-yielding assets. The AUD advanced as oil, the country’s fourth most valuable export, gained as much as 2.3 percent. The NZD and AUD earlier fell against the JPY on speculation that Japanese investors are recouping their profits and government officials won’t slow the yen’s appreciation. The GBP posted a strong rebound against the USD and other major currencies after the Confederation of British Industry's measure of retail-sales activity rose to its highest level in five months.
The interbank cost of borrowing euros held near lows yesterday as the ECB prepared to launch an offer of long-term funding while U.K. consumer lending stayed subdued despite central bank efforts to get cash circulating again. Benchmark sterling Libor rates hit a new low but short-sterling interest rate futures sold off, pushing implied rates higher as economists, attending a meeting at the Bank of England, saying it was not planning to alter the interest it pays on reserves any time soon.
Steve Hanke, a professor of Applied Economics at Johns Hopkins University, said the U.S. Federal Reserve may keep its benchmark interest rate at a record low for “too long,” increasing pressure on the USD to weaken. Hanke said that Fed Chairman Bernanke and other policy makers may hold off increasing rates until after the mid-term Congressional elections in November 2010, as inflation stays within the central bank’s target range. The U.S. economy will probably slow down once rates are increased.
On the economic calendar today watch for the ADP Employment Report for September. Analysts expect the ADP to come in at an improved minus 200K -- last month it was minus 298K. The final GDP report for the second quarter is anticipated to show a minus 1.2%; last month it was minus 1.0%. The Chicago PMI for September will also be released and is expected to show an improvement. And finally the Crude Inventory for the week of September 25th is also on today’s economic calendar.
And closing out the third quarter on the earnings calendar are Diamond Foods, Actuant, Lawson Software, Duncan Energy, Smiths Group, Kaufman & Broad, and the HF Company.
Happy Trading,
James Dicks
Japan's new finance minister, Hirohisa Fujii, has upset the foreign exchange markets this week. First with comments that suggested he was content with recent JPY strength but then he appeared to backpedal a bit. Fujii said the government may act to stabilize the foreign- exchange market but denied that he supported a stronger yen; a day after the currency hit an eight-month high. His comments initially helped move the JPY to 8-month highs against the USD but it has since given up those gains.
Toyoo Gyohten, President of the Institute for International Monetary Affairs, said that Japan’s government should support the U.S. dollar’s status as the world’s reserve currency. Gyohten’s comments suggest that the Democratic Party of Japan, a party that came to power for the first time this month, may continue the policy line of the former government by supporting the dollar’s authority while continuing to buy U.S. government debt.
The USD also saw some gains versus the EUR as Russia said it will maintain a share of U.S. Treasuries in its international currency reserves, reducing concern that central banks will diversify away from the U.S. dollar. The CAD also lost some ground against the USD as crude oil fell and an interest rate cut by the Russian central bank sparked concern that a global recovery could falter. Bank Rossii First Deputy Chairman said that Russia will avoid diversifying into the AUD and CAD because of liquidity concerns.
Meantime, Canada's minority Conservative government gained the temporary support of an opposition party this week and is poised to survive a no-confidence vote in Parliament later this week. The vote will come before Parliament debates draft legislation to boost jobless benefits by about C$1 billion ($920 million) -- a measure that the left-leaning New Democratic Party has long demanded.
The AUD gained against the USD and the NZD recouped earlier losses as an increase in global stocks encouraged investor demand for higher-yielding assets. The AUD advanced as oil, the country’s fourth most valuable export, gained as much as 2.3 percent. The NZD and AUD earlier fell against the JPY on speculation that Japanese investors are recouping their profits and government officials won’t slow the yen’s appreciation. The GBP posted a strong rebound against the USD and other major currencies after the Confederation of British Industry's measure of retail-sales activity rose to its highest level in five months.
The interbank cost of borrowing euros held near lows yesterday as the ECB prepared to launch an offer of long-term funding while U.K. consumer lending stayed subdued despite central bank efforts to get cash circulating again. Benchmark sterling Libor rates hit a new low but short-sterling interest rate futures sold off, pushing implied rates higher as economists, attending a meeting at the Bank of England, saying it was not planning to alter the interest it pays on reserves any time soon.
Steve Hanke, a professor of Applied Economics at Johns Hopkins University, said the U.S. Federal Reserve may keep its benchmark interest rate at a record low for “too long,” increasing pressure on the USD to weaken. Hanke said that Fed Chairman Bernanke and other policy makers may hold off increasing rates until after the mid-term Congressional elections in November 2010, as inflation stays within the central bank’s target range. The U.S. economy will probably slow down once rates are increased.
On the economic calendar today watch for the ADP Employment Report for September. Analysts expect the ADP to come in at an improved minus 200K -- last month it was minus 298K. The final GDP report for the second quarter is anticipated to show a minus 1.2%; last month it was minus 1.0%. The Chicago PMI for September will also be released and is expected to show an improvement. And finally the Crude Inventory for the week of September 25th is also on today’s economic calendar.
And closing out the third quarter on the earnings calendar are Diamond Foods, Actuant, Lawson Software, Duncan Energy, Smiths Group, Kaufman & Broad, and the HF Company.
Happy Trading,
James Dicks
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