Tag Archive: Japan
BOJ Moves to Slow JGB Sell-Off, while Month-End is Making for Subdued Price Action in FX outside the Yen
Overview: The Bank of Japan took the market by
surprise with its adjustment of the cap on the 10-year yield before the
weekend, and then stepped in to buy the government bond as yields rose in
reaction today. The move helped lift the dollar to JPY142.50. from where it had
settled on Friday (~JPY141.15). The dollar is mostly softer, however, with only
the yen and Swiss franc weaker. The Australian dollar is leading the other
currencies higher ahead...
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Bond Rally Continues, Greenback Consolidates with Softer Bias
Overview: The main development in the capital
markets is the decline in yields. In Europe, benchmark 10-year yields are off
7-11 bp today, extending the move that began last week. The 10-year Germany
Bund yield peaked last Thursday near 2.68% and is near 2.40% now. Similarly,
the 10-year Italian yield has fallen from 4.42% to below 4.05% today. The
10-year US Treasury yield fell in five of the last six sessions and is off
almost five basis points...
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After Dramatic Week, Capital Markets are Stabilizing
Overview: After tumbling headlong this week, the
dollar appears to be broadly consolidating ahead of the weekend Among the G10
currencies, the Canadian dollar's 1.2% gain is the least and it made new
10-month highs earlier today The beleaguered Scandis soared The Norwegian
krone's 6.6% advance followed by the Swedish krona's 5.8% surge led the major
currencies The Dollar Index is off about 2.4% this week ahead of the North
American session It is...
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Dollar Sell-Off is Getting Stretched
Overview: Softer-than-expected US CPI, following
weaker than expected job growth has sent the greenback tumbling. The dollar is
stabilizing against the yen today, but the downside momentum is intact against
the other major currencies. The euro approached $1.1175, sterling $1.3080, and
the greenback slumped to almost CHF0.8615. The Australian dollar reached $0.6850,
and the New Zealand dollar tested $0.6360. The Canadian dollar, often a laggard
in a...
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US CPI and Bank of Canada Highlight North American Session
Overview: The US dollar's losses have been extended
ahead of the June CPI. At the same time, speculation that the Bank of Japan
will adjust policy later this month saw the yen extend its gains for the fifth
consecutive session. Sterling made new highs since last April, while the Swiss
franc has risen to its best levels in about 2 1/2 years. The Dollar Index
gapped lower and through the trendline drawn off the April and May lows. The
greenback has...
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Yen Extends Recovery on Wage Data, Yuan Ticks Up Too
Overview: A powerful short squeeze has lifted the
yen by the most in two months this week. The dollar's push today below JPY143
was encouraged by the stronger than expected wage growth. The US jobs report
will test its strength. The PBOC fixed the yuan sharply higher today and it is
the only emerging market currency that is higher on the day, ahead of the Latam
open. The dollar has not drawn much support for the surge in US yields. The
10-year...
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Sobering PMI Readings Sap Risk Appetites
Overview: As US markets prepare to re-open from yesterday's holiday, the dollar
is trading mostly higher, though the euro and yen are steady to slightly firmer.
Narrow ranges are prevailing. The Canadian and Australian dollars are
exceptions and are off about 0.3%. Emerging market currencies are mostly lower,
including Russia, China, South Africa, and Turkey. Final service and composite
PMIs were mostly revised lower in Japan, Australia, and the...
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What Happened Today
The US dollar was mostly softer. The
New Zealand dollar was the strongest (~0.85%) helped by cross rate gains
against the Australian dollar, following the RBA’s decision to stand pat. The
Australian dollar fell to one-month lows below NZD1.08. There is scope for
another 0.5%, or so to the next target near NZD1.0750. The RBA’s decision to
leave its cash target at 4.10% was not surprising, and despite the hawkish
rhetoric, the market downgraded the...
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The Greenback Starts H2 on a Firm Note
Overview: The dollar is recovering from the
month-end losses seen at the end of last week. Only the New Zealand dollar
among the G10 currencies is holding its own. Japanese reports indicate that Tokyo
is in contact with the US Treasury about intervention, which is injecting a
note of caution as the greenback holds below JPY145.00. Chinese officials also
appear to be stepping up their efforts to stabilize the yuan. Among emerging
market currencies,...
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Market Continues to Converge With Fed’s Forward Guidance
Overview: A key development in recent days has been
the market's convergence with the Federal Reserve's forward guidance regarding
scope for two quarter-point hikes in the second half. The US two-yield is up
about six basis points today, extending yesterday's 15 bp increase. It is
approaching 5%. The Fed funds futures strip implies one hike has been fully
priced in and about a third of the next one. The dollar has risen against all
the G10...
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PBOC Fixes Dollar Lower, but It Recovers Against the Yuan, Riksbank Hikes and Market Yawns
Overview: The US dollar is narrowly mixed against
the G10 currencies. Stronger than expected Australian retail sales helped
steady the currency after the soft inflation data took it down. Sterling has
also steadied after it suffered its largest loss yesterday (~0.9%) in over a
month. Sweden's 25 bp rate hike has not given the krona much of a lift. Central
European currencies lead the emerging market currencies higher, while the PBOC
set the...
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The Dollar Regains Composure
Overview: The dollar is better bid today. It is rising against
nearly all the G10 currencies, with the Antipodeans bearing the brunt, after a
softer than expected Australian inflation report. The yen has steadied after
extending its losses to new lows for the year. Emerging market currencies are
also mostly lower, though the Mexican peso is edging higher for the fourth
consecutive session. The large Asia
Pacific bourses rallied with the exception...
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Calm Start to the Week, with Little Impact from Russia’s Drama
Overview: The drama in Russia captured the
imaginations but failed to have much impact on the capital markets. Conventional
wisdom sees it as a sign of Putin's weakness, but he has been underestimated,
including by many Ukrainians who did not think Russia was going to invade
despite America's repeated warnings. It may take some time for the implications
for the two main protagonists, Wagner head Prigozhin and Defense Minister
Shoigu. The war in...
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Greenback Jumps on Weak Flash PMIs
Overview: As the market reluctantly edges toward the
Fed's guidance, the disappointing PMIs from Europe (but also Japan and
Australia) helped boost the greenback. The Dollar Index is trading at seven-day
highs above 103 after briefly dipping below 102 to set a new low since mid-May
yesterday. The unwinding of cross positions is helping the yen hold its own
today as it consolidates near its worst level of the year. The surging dollar
and risk-off...
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Higher for Longer
Overview: The central
banks of Norway and Switzerland have hiked rates by 50 bp and 25 bp,
respectively. Attention is on the Bank of England. A 25 bp hike is widely
expected but after strong inflation report, the risk is clearly for a 50 bp
hike. In fact, we suspect a quarter-point move could see sterling sold. With a
new orthodox economics team in Turkey, a large rate hike is expected today. Late
in the North American session, Mexico's central...
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UK Inflation Surprises to the Upside and Weighs on Sterling
Overview: The UK surprised with higher-than-expected consumer
inflation and budget deficit, and the odds of a 50 bp hike tomorrow edged
higher. Sterling has been sold on the news and is the weakest of the G10
currencies, off about 0.5%. The dollar is mixed with the euro, Swedish krona,
Canadian dollar, and Swiss franc posting small gains. Emerging market
currencies are lower, including the Chinese yuan, which is at new lows since
last November. The...
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BOJ Stands Pat while the Dollar is Consolidating Ahead of the Weekend
Overview: The market has not yet become convinced
that the Fed will in fact deliver the two hikes the median dot anticipates this
year, and the dollar was sold off sharply yesterday, the day after the FOMC
meeting. In fact, the swaps market is more convinced that the ECB hikes in July
than the Fed. Outside of the yen, which was sold after the BOJ stood pat, the
G10 currencies are mostly little changed, consolidating the recent moves. Emerging...
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ECB’s Turn
Overview: The Fed's
hawkish hold and signal that it may raise rates two more time this year sent
ripples through the capital markets. Risk appetites have been dealt a blow. However,
China's rate cut and likely additional supportive measures after disappointing
data, helped lift the CSI 300 by 1.6%, the most this year. The Hang Seng rose
by nearly 2.2%, the most in three months. Europe's Stoxx 600 is snapping a
three-day advance and US index futures...
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Fed Day: Skip = Hawkish Pause, but Market Says Finito
Overview: The year-end effective Fed funds rate
implied in the futures market is about 5.11%. The rate has been averaging 5.08%
since the Fed hiked rates last month The Fed may go to pains to explain that
the steady that to be announced later today is just a pause to get a better
read on the economy, the market favors this to be the end of the tightening
cycle. The dollar is trading softer against nearly all the G10 currencies. Emerging
market...
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Japan’ Q1 GDP was Revised Up, While the Eurozone’s was Revised Down
Overview: The back-to-back surprise rate hikes by
the Australia and Canada spurred speculation that the Fed could hike next week,
and this lifted US rates and helped the dollar recover. The odds of a hike
increased, according to the indicative pricing in the Fed funds futures market
from about a 20% chance to a little above 35%. now. At yesterday's high, the
two-year yield was up a little more than 25 bp since the low before the US
employment data...
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