Market Review – 12/08/2010 22:02 GMTDollar strengthens against yen as Japanese officials show concerns over yen’s gainDollar rose versus the Japanese yen on Thursday, as Japanese Prime Minister Naoto Kan and other officials expressed concerns over yen’s excessive gain.
Although the greenback fell initially to 84.94 against the Japanese yen in Asia, dollar rebounded and ratcheted higher on cross selling in yen especially versus euro together with rumour that the BOJ checked exchange rates with banks in the foreign exchange market, as the news reported that Japanese Prime Minister Naoto Kan said to his Chief Cabinet Secretary ‘the yen’s sudden gains are rough’. Later, although dollar retreated briefly from 85.80 after Japanese Finance Minister Yoshihiko Noda’s comments, the pair then rebounded from 85.18 and rose strongly to a session high of 85.99 in NY morning due to the intra-day recovery in U.S. equities (DJI closed the day down by 59 points or 0.57% at 10320) before stabilising.
Japanese Finance Minister Yoshihiko Noda indicated excessive, disorderly forex moves would hurt economy and said he was in contact with Prime Minister on market moves and would deal appropriately with economic situation. He added that the Group of Seven financial leaders had no plans to hold a teleconference about currencies but officials in the finance ministry were sharing information with officials in other countries at the working level.
U.S. jobless claims increased unexpectedly to 484,000 last week, versus the economists’ forecast of 465,000. The weak data reinforced the view of sluggish job growth which could threaten the economic recovery.
In other news, Japanese Vice Finance Minister Rintaro Tamaki (a top currency official at the ministry) said he had exchanged views with a BOJ official on the situation in the financial markets in Japan and overseas. Earlier, Sugimoto, the former Japanese Vice Finance Minister, said that Japan forex intervention was possible if yen moved disorderly, one-sided. He added ‘it is uncertain if Japan can convince U.S. and Europe that current yen rise excessive and BOJ should think of ways to expand liquidity.’
The single currency edged higher on profit-taking in Asia after Wednesday’s selloff from 1.3186 to 1.2830 in Australia and climbed to 1.2933 in Europe. However, renewed selling interest there pressured price again due to worries about European recovery, as figures showed that Greece’s economy shrank more than expected in Q2, and euro extended decline from last week’s 1.3334 high to 1.2780 at NY opening before staging a recovery to 1.2874.
Although the British pound fell to 1.5615 initially in Australia, cable rebounded on short-covering in Asia and rose to an intra-day high of 1.5714 in Europe. However, renewed selling interest emerged at there and cable weakened to 1.5562 on active cross selling in sterling (eur/gbp rebounded from 0.8204 to 0.8266) in NY before stabilising.
On data front, Eurozone industrial production came in at -0.1% m/m and 8.2% y/y in June, versus the economists’ forecast of 0.7% m/m and 9.3% y/y respectively.
Economic data to be released on Friday include: New Zealand Retail sales, Germany GDP, Swiss Combined PPI, EU GDP, Trade balance (euro), U.S. CPI , CPI core, Real earnings, Retail sales, Retail sales less auto, U. Michigan survey Prel., Business inventories.
