By Kosuke Goto and David McIntyre
Feb. 5 (Bloomberg) -- The yen traded near a three-week low against the Australian dollar on speculation the central bank of the southern hemisphere nation will raise its benchmark interest rate today.
The currency may weaken for a fourth day against the New Zealand dollar as a decline in expectations for price swings encourages investors to purchase higher-yielding assets funded in Japan. Volatility fell to the lowest level in almost a month, improving confidence in so-called carry trades.
``You expect the yen to weaken on the back of carry trades rallying,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. ``There's a bit more to go for the Australian dollar on the confirmation of a rate hike.''
The yen traded at 96.82 against the Australian dollar at 9:11 a.m. in Tokyo from 96.91 late in New York yesterday, when it fell to 97.21 yen, the lowest since Jan. 15. The Australian dollar was at 90.71 U.S. cents after reaching an almost three- month high of 91.01 cents.
Japan's currency was little changed at 106.68 per dollar and 158.18 a euro, from 106.71 and 158.26 in New York yesterday, respectively. The dollar traded at $1.4825 per euro from $1.4830.
Australian Interest Rate
All 27 economists surveyed by Bloomberg News forecast the Australian central bank will raise its benchmark rate a quarter- percentage point to 7 percent, the highest level since 1996. Policy makers will announce their decision at 2:30 p.m. in Sydney.
In carry trades, speculators get funds in a country with low borrowing costs such as Japan and invest in one with higher returns, earning the spread between the two. Japan's benchmark rate is 0.5 percent, the lowest among industrialized nations.
One-month implied volatility for the yen fell to 11.48 percent today, the lowest since Jan. 10. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options.
Service Growth
Gains in the dollar may be limited before a U.S. report today that is likely to show service industries expanded in January at the slowest pace in almost a year. The Institute for Supply Management's index of non-manufacturing businesses, which make up almost 90 percent of the economy, dropped to 53 from 54.4, according to the median estimate of economists in a Bloomberg News survey.
``The dollar is an unreliable currency now,'' said Yuuki Sakurai, a Tokyo-based investment manager at Fukoku Mutual Life Insurance Co., which manages the equivalent of $41.5 billion in assets. ``The U.S. housing markets will remain sluggish, buffeting the economy.''
The U.S. currency may fall to 105.80 yen this week, Sakurai said.
ECB
The euro may strengthen for the second day as traders cut bets that the European Central Bank will reduce borrowing costs this year. ECB policy maker Klaus Liebscher said the central bank will do what is needed to prevent a price-wage spiral from boosting inflation, according to a statement published by the Austrian central bank.
The ECB will leave its benchmark interest rate at a six- year high of 4 percent on Feb. 7, all 55 economists surveyed by Bloomberg forecast. Interest-rate futures show the implied rate on the June Euribor contract rose to 4.03 percent yesterday, from 3.96 percent on Feb. 1. The rate averaged 18 basis points more than the ECB's benchmark from 1999 until August, when the collapse of the U.S. subprime-mortgage market sparked a squeeze on credit.
The dollar will trade at $1.48 per euro by the end of this quarter and $1.40 by year-end, according to the median forecast of 44 analysts in a Bloomberg News survey.
Showing posts with label Forex. Show all posts
Showing posts with label Forex. Show all posts
Tuesday, February 5, 2008
Thursday, January 31, 2008
Yen Falls on Speculation Japanese Importers Selling Currency
By Kosuke Goto and Ron Harui
Jan. 31 (Bloomberg) -- The yen fell against the dollar, paring gains for the month, on speculation Japanese importers are selling the currency to pay month-end bills.
The yen declined most against the South African rand and the Brazilian real as Asian stocks reversed earlier losses, giving Japanese investors confidence to buy higher-yielding assets. The dollar traded near a two-week low versus the euro after the Federal Reserve cut its benchmark interest rate half a percentage point and indicated further reductions may be needed.
``Japanese importers are selling the yen and buying the dollar,'' said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded lender by assets. ``There is special demand for the dollar at the end of the month.''
The Japanese currency fell to 106.46 per dollar at 11:25 a.m. in Tokyo, from 106.27 yesterday in New York, paring its monthly advance to 4.7 percent. It traded at 157.95 against the euro from 157.93. The yen may fall to 107 per dollar today, Hayashi said.
The yen declined 1.1 percent to 14.5805 against the rand from 14.4295 in New York yesterday. It also slid 0.4 percent to 60.5575 against the real and 0.2 percent to 211.73 versus the pound. The MSCI Asia Pacific Index of regional shares gained 0.9 percent after falling as much as 0.6 percent.
The dollar traded at $1.4842 per euro after reaching $1.4907 yesterday, the weakest since Jan. 15.
Since 2001
The yen still headed for its biggest monthly gain against the dollar since August 2001 as the Asian equity benchmark was set to suffer the worst performance since September 2001, discouraging investors from buying higher-yielding currencies funded by cheap loans in Japan. It has gained against all the major currencies in January.
The currency rose the most versus South Africa's rand this month, as the Federal Reserve's benchmark interest rate cut failed to ease concern over a U.S. recession.
``Investors are taking money out of riskier assets like stocks and buying back yen,'' said Hiroshi Yoshida, a foreign- exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth- largest publicly traded lender by assets. ``Equity markets show no sign of stabilizing.''
The yen may rise to 156.50 per euro and 105.70 against the dollar today, Yoshida forecast.
One-month implied volatility for the yen rose to 13.45 percent today, from 13.25 percent yesterday. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options. Higher volatility may discourage carry trades.
In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between them. The risk is that currency moves erase those profits.
Fed Rate
The dollar has declined against 14 of the 16 most traded currencies this month as the Fed lowered the target for the overnight lending rate between banks to 3 percent.
``I am dollar-bearish,'' said Takeshi Kabe, a senior currency dealer at Mizuho Corporate Bank Ltd. in Tokyo, a unit of Japan's second-largest publicly traded lender by assets. ``The dollar will be sold after the Fed's rate cut. The U.S. economy is worsening.''
The U.S. currency may fall to as low as 105.50 yen and $1.4920 per euro today, Kabe said.
The U.S. currency has dropped 6.6 percent against the euro since the Fed began cutting the target rate for overnight lending between banks in September to prevent the housing slump from plunging the world's largest economy into recession.
Weighing on Dollar
``The weak dollar trend will continue,'' said Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland Group Plc, the U.K.'s second-biggest bank. ``Concern over the U.S. recession was not excessive. It's becoming real. We expect the Fed to cut rates again by a half percent in March and a quarter percent in April.''
The dollar may fall to 104 yen and $1.52 per euro by March 31, Yamamoto said.
The dollar fell to $1.4967 on Nov. 23, the lowest since the European currency debuted in 1999, as falling U.S. interest rates made dollar-denominated assets less attractive to international investors.
When the Fed made an emergency reduction last week, the dollar dropped 1.2 percent against the euro, the most in more than two years. The fed funds target fell below the European Central Bank's main refinancing rate, currently 4 percent, for the first time since November 2004.
Jan. 31 (Bloomberg) -- The yen fell against the dollar, paring gains for the month, on speculation Japanese importers are selling the currency to pay month-end bills.
The yen declined most against the South African rand and the Brazilian real as Asian stocks reversed earlier losses, giving Japanese investors confidence to buy higher-yielding assets. The dollar traded near a two-week low versus the euro after the Federal Reserve cut its benchmark interest rate half a percentage point and indicated further reductions may be needed.
``Japanese importers are selling the yen and buying the dollar,'' said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded lender by assets. ``There is special demand for the dollar at the end of the month.''
The Japanese currency fell to 106.46 per dollar at 11:25 a.m. in Tokyo, from 106.27 yesterday in New York, paring its monthly advance to 4.7 percent. It traded at 157.95 against the euro from 157.93. The yen may fall to 107 per dollar today, Hayashi said.
The yen declined 1.1 percent to 14.5805 against the rand from 14.4295 in New York yesterday. It also slid 0.4 percent to 60.5575 against the real and 0.2 percent to 211.73 versus the pound. The MSCI Asia Pacific Index of regional shares gained 0.9 percent after falling as much as 0.6 percent.
The dollar traded at $1.4842 per euro after reaching $1.4907 yesterday, the weakest since Jan. 15.
Since 2001
The yen still headed for its biggest monthly gain against the dollar since August 2001 as the Asian equity benchmark was set to suffer the worst performance since September 2001, discouraging investors from buying higher-yielding currencies funded by cheap loans in Japan. It has gained against all the major currencies in January.
The currency rose the most versus South Africa's rand this month, as the Federal Reserve's benchmark interest rate cut failed to ease concern over a U.S. recession.
``Investors are taking money out of riskier assets like stocks and buying back yen,'' said Hiroshi Yoshida, a foreign- exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth- largest publicly traded lender by assets. ``Equity markets show no sign of stabilizing.''
The yen may rise to 156.50 per euro and 105.70 against the dollar today, Yoshida forecast.
One-month implied volatility for the yen rose to 13.45 percent today, from 13.25 percent yesterday. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options. Higher volatility may discourage carry trades.
In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between them. The risk is that currency moves erase those profits.
Fed Rate
The dollar has declined against 14 of the 16 most traded currencies this month as the Fed lowered the target for the overnight lending rate between banks to 3 percent.
``I am dollar-bearish,'' said Takeshi Kabe, a senior currency dealer at Mizuho Corporate Bank Ltd. in Tokyo, a unit of Japan's second-largest publicly traded lender by assets. ``The dollar will be sold after the Fed's rate cut. The U.S. economy is worsening.''
The U.S. currency may fall to as low as 105.50 yen and $1.4920 per euro today, Kabe said.
The U.S. currency has dropped 6.6 percent against the euro since the Fed began cutting the target rate for overnight lending between banks in September to prevent the housing slump from plunging the world's largest economy into recession.
Weighing on Dollar
``The weak dollar trend will continue,'' said Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland Group Plc, the U.K.'s second-biggest bank. ``Concern over the U.S. recession was not excessive. It's becoming real. We expect the Fed to cut rates again by a half percent in March and a quarter percent in April.''
The dollar may fall to 104 yen and $1.52 per euro by March 31, Yamamoto said.
The dollar fell to $1.4967 on Nov. 23, the lowest since the European currency debuted in 1999, as falling U.S. interest rates made dollar-denominated assets less attractive to international investors.
When the Fed made an emergency reduction last week, the dollar dropped 1.2 percent against the euro, the most in more than two years. The fed funds target fell below the European Central Bank's main refinancing rate, currently 4 percent, for the first time since November 2004.
Australian, N.Z. Dollars Rise to Two-Week Highs on Fed Rate Cut
By David McIntyre and Emma O'Brien
Jan. 31 (Bloomberg) -- The Australian and New Zealand dollars rose to the highest level in more than two weeks after the Federal Reserve cut its benchmark interest rate, attracting investors to the countries' higher yielding bonds.
Australia's rate advantage increased to a three-year high and New Zealand's to the widest in almost 15 years after the Fed cut rates by a half percentage point to 3 percent. Australia's dollar has gained 6.9 percent and New Zealand's jumped 11 percent since Sept. 18, when the Fed cut borrowing costs for the first time in four years in a bid to reignite growth.
``The Australian and New Zealand dollars were boosted by the Fed rate cut,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``The U.S. dollar is weak right across the board with the Fed leaving the door wide open for further rate cuts.''
The Australian dollar, known as the Aussie, traded as high as 90.16 U.S. cents, the strongest since Jan. 15. It bought 89.13 cents at 10:06 a.m. in Sydney compared with 88.87 cents late in Asia yesterday.
The New Zealand dollar, dubbed the kiwi, climbed 0.5 percent to 78.26 U.S. cents and touched 79.16 cents, the strongest since Jan. 16.
Australia's dollar may reach 90.20 cents and New Zealand's may touch 79.35 cents today, which are resistance levels for the currencies, Trinh said. Resistance is where orders to sell a currency may be clustered.
Trade Deficit
New Zealand's dollar held gains after a government report showed the country's annual trade deficit narrowed to the smallest in two years as soaring prices for dairy products drove exports to a record. Rising overseas shipments, which make up 30 percent of the economy, may drive New Zealand's growth and generate demand for the currency.
The shortfall shrank to NZ$5.31 billion ($4.2 billion) in 2007 from NZ$5.69 billion in the 12 months through Nov. 30, Statistics New Zealand said in Wellington today. That beat the median estimate of NZ$5.5 billion in a Bloomberg News survey of nine economists.
The Fed said in a statement that downside risks to growth remain, suggesting policy makers may reduce rates again.
Australia's rate premium has increased to 3.75 percentage points, the highest since September 2004. New Zealand's rate advantage widened to 5.25 points, the most since February 1993.
The kiwi has gained the most among the 16 most-traded currencies since the Fed started cutting in September as investors were attracted to the country's 8.25 percent rate, one of the highest among developed economies. The Aussie has also benefited because of Australia's 11-year high 6.75 percent rate, which traders are betting will be raised next week.
Australian government bonds strengthened, pushing the yield on the 10-year note down 2 basis points to 6.04 percent. New Zealand's equivalent yield rose 2 basis points to 6.30 percent. A basis point equals 0.01 percentage point.
Jan. 31 (Bloomberg) -- The Australian and New Zealand dollars rose to the highest level in more than two weeks after the Federal Reserve cut its benchmark interest rate, attracting investors to the countries' higher yielding bonds.
Australia's rate advantage increased to a three-year high and New Zealand's to the widest in almost 15 years after the Fed cut rates by a half percentage point to 3 percent. Australia's dollar has gained 6.9 percent and New Zealand's jumped 11 percent since Sept. 18, when the Fed cut borrowing costs for the first time in four years in a bid to reignite growth.
``The Australian and New Zealand dollars were boosted by the Fed rate cut,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``The U.S. dollar is weak right across the board with the Fed leaving the door wide open for further rate cuts.''
The Australian dollar, known as the Aussie, traded as high as 90.16 U.S. cents, the strongest since Jan. 15. It bought 89.13 cents at 10:06 a.m. in Sydney compared with 88.87 cents late in Asia yesterday.
The New Zealand dollar, dubbed the kiwi, climbed 0.5 percent to 78.26 U.S. cents and touched 79.16 cents, the strongest since Jan. 16.
Australia's dollar may reach 90.20 cents and New Zealand's may touch 79.35 cents today, which are resistance levels for the currencies, Trinh said. Resistance is where orders to sell a currency may be clustered.
Trade Deficit
New Zealand's dollar held gains after a government report showed the country's annual trade deficit narrowed to the smallest in two years as soaring prices for dairy products drove exports to a record. Rising overseas shipments, which make up 30 percent of the economy, may drive New Zealand's growth and generate demand for the currency.
The shortfall shrank to NZ$5.31 billion ($4.2 billion) in 2007 from NZ$5.69 billion in the 12 months through Nov. 30, Statistics New Zealand said in Wellington today. That beat the median estimate of NZ$5.5 billion in a Bloomberg News survey of nine economists.
The Fed said in a statement that downside risks to growth remain, suggesting policy makers may reduce rates again.
Australia's rate premium has increased to 3.75 percentage points, the highest since September 2004. New Zealand's rate advantage widened to 5.25 points, the most since February 1993.
The kiwi has gained the most among the 16 most-traded currencies since the Fed started cutting in September as investors were attracted to the country's 8.25 percent rate, one of the highest among developed economies. The Aussie has also benefited because of Australia's 11-year high 6.75 percent rate, which traders are betting will be raised next week.
Australian government bonds strengthened, pushing the yield on the 10-year note down 2 basis points to 6.04 percent. New Zealand's equivalent yield rose 2 basis points to 6.30 percent. A basis point equals 0.01 percentage point.
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