Forex Trading: USD/JPY Falls to 3−Year Low

Minggu, 02 Maret 2008

un, Mar 2 2008, 23:36 GMT
by Hans Nilsson

In NY trading Friday, the dollar fell to a 3-year low versus the yen on tumbling US stocks but rose against the Australian dollar on carry trade unwinding. The dollar also hit an all-time low against the euro for a fourth straight day but recovered somewhat later. Next week’s most important events will be central bank meetings in Canada, Australia, UK, and the EMU. The Bank of Canada is expected to lower interest rates while the Reserve Bank of Australia, the Bank of England, and the European Central Bank will possibly keep rates unchanged.

The USD/JPY fell to the lowest level since March 2005 after dropping below important support in the 104-105 area and steep losses in international equity markets. The pair is in a clear downward trend, trading in tandem with the US stock market. There is support in the 102-area. The pair is oversold on monthly, weekly and daily bases measured by the relative strength index, but the pair will probably not reverse its downtrend until there is a bottom in the equity market.

US & Canada

Canada’s Q4 current account fell into deficit for the first time since 1999. Canada had a C$513 million ($523 million) current account deficit in Q4, compared with a revised C$1.34 billion surplus in Q3, Statistics Canada reported. For all of last year, the current account surplus narrowed to C$14.2 billion from C$23.6 billion.

US personal income rose a more-than-expected 0.3% m/m in January, down from a 0.5% m/m gain in December, the Commerce Department said.

US personal spending rose a more-than-expected 0.4% m/m in January after rising an upwardly revised 0.3% in December, the Commerce Department said. Yet considering rising prices, January personal spending was flat and the data may not be as positive.

The price index for personal consumption expenditures rose 0.4% m/m in January. The PCE deflator excluding food and energy, or core PCE, rose 0.3% m/m in January. The PCE deflator climbed 3.7% y/y and the core PCE climbed 2.2% y/y in January. The Fed watches the y/y core PCE closely for signs of problematic inflation. The 2.2% y/y core PCE indicates inflation remains above the Federal Reserve’s 1.0%-2.0% comfort zone. The data will add to worries over inflations risks but will not deter the Fed from cutting interest rates in March to revive US economic growth.

The Chicago PMI plunged to 44.5 in February, its lowest level in more than six years, versus 51.5 in January, the National Association of Purchasing Management-Chicago reported. A reading below 50 indicates a contraction in economic activity.

The Reuters/University of Michigan final consumer sentiment index dropped to a 16-year low of 70.8 in February, from 78.4 in January. The consumer expectations index dropped to 62.4, also a 16-year low, from 68.1. The current conditions index fell to 83.8 from 94.4.

Federal Reserve Bank of Chicago President Charles Evans, urging prompt removal of rate cuts when no longer needed, said: “When insurance proves to be no longer necessary, removing it promptly and recalibrating policy to appropriate levels will reiterate and reinforce our commitment” to policy goals. “If we are transparent so that markets understand that we will adhere to this strategy, such insurance-based monetary policy will not encourage excessive risk-taking,” he added.

Europe

Germany’s inflation rate in February was unchanged from January’s 2.9%, the Federal Statistics Office said. The number is above the ECB’s limit for a 12th month.

Germany’s retail sales rose a more-than-forecast 1.6% m/m in January, the most since April 2007, after December’s revised 0.2% m/m decline, the Federal Statistics Office said.

European economic confidence fell more than forecast in February. The executive and consumer sentiment index in the euro area declined to 100.1, the lowest since November 2005, from 101.7 in January, the European Commission said.

Overall euro-area inflation accelerated to 3.2% in January, the highest in 14 years, from 3.1% in December, Eurostat reported. The core inflation rate, which excludes energy, food, alcohol and tobacco prices, eased to 1.7% from 1.9%.

Euro-area unemployment held at a record low of 7.1% in January, matching a revised estimate for December, Eurostat reported.

Asia-Pacific

Japan’s consumer prices rose for a fourth month in January, matching the fastest pace in more than nine years. Japan’s core CPI climbed 0.8% y/y in January, the same rate as December, the Statistics Bureau said.