Market Review – 11/03/2011 20:32
The Japanese yen rallies broadly after massive earthquake in Japan
The Japanese yen surged across the board on Friday on speculation that Japanese insurance companies will need to sell foreign assets to pay for claims after a devastating 8.9 magnitude earthquake hit the northeast coast of Japan.
Despite dollar’s initial brief jump from 82.78 to 83.30 against the Japanese yen immediately after the earthquake news, the pair then reversed all its gains and tumbled to 82.00 in European midday. Later, although price staged a moderate recovery, the dollar extended intra-day selloff after triggering stops below 81.95/00 level to a day’s low of 81.65 in NY mid-day before stabilising. Eur/jpy, aud/jpy, gbp/jpy tanked from 115.02 to 112.93, 83.29 to 81.98 and 133.73 to 130.89 respectively before recovering on short-covering.
In sharp contrast to the previous session, euro rallied in NY on Friday on active short-covering. Despite extending erratic fall from Monday’s high of 1.4036 after meeting renewed selling at 1.3841 in European morning as the earthquake in Japan dampened risk appetite initially, lack of strong follow through selling below Thursday’s low of 1.3775 prompted euro to rebound and price then surged from 1.3752 to 1.3884 in NY midday on aggressive short-covering together with active cross-buying in euro, eur/gbp rose strongly from 0.8590 to 0.8656 whilst eur/jpy and eur/chf rebounded sharply from 112.93 to 113.86 and 1.2827 to 1.2931 respectively. The single currency eventually extended intra-day rise to 1.3916 in late NY trade after news from Reuters quoted the chairman of the EU meeting Herman Van Rompuy as saying in a message on his Twitter page that Eurozone leaders have reached an agreement on a competitiveness pact for the single currency area.
Similar to the euro, the British pound also rallied against the greenback in NY on Friday. Despite falling below Thursday’s low of 1.6038 from Asian high of 1.6080 in European midday, intra-day rally in euro lifted cable and price surged from 1.5977 to 1.6080 in late NY trade.
On the data front, German’s consumer price index rose by 0.5% m/m and 2.1% y/y in February. versus economists’ forecast of 0.5% m/m and 2.0% y/y respectively. German final HICP rose by 0.6% m/m and 2.2% y/y. While the U.K. producer input price rose by 1.1% m/m and 14.6% y/y in February, highest annual rate since Oct. 2008. U.K producer output price increased by 0.5% m/m and 5.3% y/y, also highest annual rate since Oct. 2008.
Data to be released next week include:
Japan BOJ rate decision, capacity utilisation, industrial production and consumer confidence, Eurozone industrial production and Canada capacity utilisation on Monday.
Australian RBA’s board minutes, Japan machine tools orders, U.K. DCLG house prices, Eurozone employment, Germany ZEW index and current situation, U.S, import/export, foreign treasury buys, Net LT TIC flows, NAHB housing market index and Fed rate decision on Tuesday.
Eurozone HICP index, U.K. ILO unemployment, claimant count and Average earning 3-months, Swiss ZEW index, U.S. current account, housing starts, building permits and PPI on Wednesday.
Swiss SNB rate decision, U.S. CPI, real earnings,jobless claims, midwest manufacturing index, capacity utilisation, industrial production, leading indicators and Philadelphia fed survey on Thursday.
Japan BOJ minutes, Germany PPI, Swiss combined PPI, U.K. Nationwide consumer confidence, Eurozone current account and trade balance, Canada CPI on Friday.
GMT