Sept. 30 (Bloomberg) -- The dollar fell against the yen, reversing early gains, on speculation a Federal Reserve official will reiterate today that record-low interest rates will be unchanged for an extended period.
The U.S. currency headed for a quarterly decline against 14 of 16 major counterparts as Asian stocks rose and before a report this week forecast to show American employers cut fewer jobs, boosting demand for higher-yielding assets. Australia’s dollar climbed to a 13-month high against the greenback on better-than-forecast retail sales, bolstering speculation the Reserve Bank of Australia will raise rates as early as November.
“Fed policy makers will probably keep low borrowing costs unchanged until next summer, weighing on the dollar,” said Akira Hoshino, chief manager of the foreign-exchange trading department in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest lender.
The dollar dropped to 89.79 yen as of 1:07 p.m. in Tokyo from 90.09 yen in New York yesterday. It fell to as low as 88.24 yen on Sept. 28, the weakest level since Jan. 23. For the quarter, the dollar has declined 6.8 percent against the yen.
The euro advanced to $1.4617 from $1.4587. Yesterday, it touched $1.4527, the lowest level since Sept. 14. The euro has risen 4 percent against the dollar this quarter.
Japan’s currency fetched 131.25 per euro from 131.40 in New York yesterday. The yen has gained 3 percent against the euro this quarter. The MSCI Asia Pacific Index of regional shares added 0.5 percent.
Fed’s Kohn
The dollar retreated from near a two-week high against the euro before Fed Vice Chairman Donald Kohn speaks on a panel in Washington about the central bank’s exit policies. Kohn earlier this month said a swift increase in U.S. interest rates is unlikely.
“With the global economy quite weak and inflation low, a large and rapid rise seems quite improbable,” Kohn said at the Brookings Institution in Washington on Sept. 10.
The Bank of Japan may decide as soon as next month to let its emergency corporate-debt buying programs expire as businesses regain access to private funding, people with direct knowledge of the discussions said.
The decision would echo steps by central banks to pare back unprecedented measures to unfreeze credit as the financial industry stabilizes. At the same time, because Japan’s economic recovery is threatened by rising unemployment and deflation, policy makers are likely to keep the benchmark interest rate target near zero into next year, analysts said.
U.S. Payrolls
The U.S. Labor Department is forecast to report payrolls fell by 180,000 workers in September, the smallest drop since August 2008, according to the median estimate of economists in a Bloomberg News survey. The data is due on Oct. 2.
The Australian currency rose against all of its 16 major counterparts as retail sales climbed 0.9 percent in August after dropping 0.9 percent in July, the Bureau of Statistics said today. The median forecast of economists surveyed by Bloomberg News was for a 0.5 percent gain.
“The market’s focus was on the retail sales number which had a very strong result,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney.
The Australian dollar rose 1 percent to 87.88 U.S. cents. It earlier touched 87.99, the highest since August 2008. Australia’s currency gained 9 percent against its U.S. counterpart this quarter.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
Last Updated: September 30, 2009 00:13 EDT
Wednesday, September 30, 2009
Tuesday, September 29, 2009
Trichet Says Strong Dollar Is ‘Extremely Important’ (Update1)
By Gabi Thesing and Christian Vits
Sept. 28 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said a strong dollar is “extremely important” for the world economy and it’s too early for the ECB to unwind emergency stimulus measures.
“In the present situation it is extremely important that we can have in the framework at the level of global finance and the global economy a strong dollar, as the authorities in the U.S. are saying,” Trichet told lawmakers in Brussels today. “The solidity of the dollar is very important.”
Trichet’s comments come after a 15 percent slide in the dollar against the euro since February that’s threatening to hamper Europe’s recovery from the worst recession since World War II. With the Group of 20 nations pledging to rebalance the global economy away from a trade deficit in the U.S., the risk for the ECB is that its economy feels the pain of further dollar adjustment.
The euro fell from $1.4661 to as low as 1.4627 after Trichet’s remarks.
“It would be premature to declare the crisis over,” Trichet said. “Now is not the time” for the ECB to unwind its stimulus measures. “However, at some point in time an exit strategy will have to be implemented. The ECB has an exit strategy and stands ready to put it into action when the time comes.”
Non-Standard Measures
The Frankfurt-based central bank has lowered its benchmark lending rate to a record low of 1 percent to fight Europe’s worst recession since World War II. It is also employing “non- standard measures” to get credit flowing through the economy again, lending banks as much money as they need at the benchmark rate and buying covered bonds.
“The euro-area economy shows signs of stabilization,” Trichet said. “In the period ahead we expect to see a very gradual recovery.”
The ECB this month predicted economic growth in the 16- nation euro region of about 0.2 percent in 2010, revising a June forecast for a 0.3 percent contraction. In 2009, the economy will shrink about 4.1 percent, less than the 4.6 percent contraction predicted three months earlier.
G-20 leaders concluded a summit in Pittsburgh on Sept. 25 promising to pursue policies that bring the world economy into greater balance. That initiative may require the dollar to fall further so as to narrow the U.S. trade deficit, according to economists at Morgan Stanley.
Dollar’s Dominance
Trichet’s comments came the same day that World Bank President Robert Zoellick said the U.S. dollar’s dominance as the world’s main reserve currency will be challenged as the financial crisis reshapes the global economy.
“There is every reason to believe that the euro’s acceptability could grow,” Zoellick said. “Of course, the U.S. dollar is and will remain a major currency. But the greenback’s fortunes will depend heavily on U.S. choices” on inflation, the budget deficit and financial oversight, he said.
U.S. Treasury Secretary Timothy Geithner last week defended the dollar’s role as the world’s reserve currency. The U.S. has a “special responsibility” to preserve confidence in its financial system and “sustain the dollar’s role as the principal reserve currency in the international financial system,” he said Sept. 24 in Pittsburgh.
Trichet also urged banks to accelerate lending to their economies. The global recession has made banks reluctant to lend and also eroded demand for debt. In Europe, loans to the private sector rose 0.1 percent in August from a year earlier, the slowest growth since records began in 1991, the ECB said last week.
There’s a “gradual improvement in financing conditions which is expected to support demand for credit in the period ahead,” Trichet said. “It is for this reason that the Governing Council continues to regard ECB interest rates as appropriate.”
“Our message to banks is clear: do your job,” he added.
To contact the reporters on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net; Christian Vits in Frankfurt at cvits@bloomberg.net
Last Updated: September 28, 2009 12:48 EDT
Sept. 28 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said a strong dollar is “extremely important” for the world economy and it’s too early for the ECB to unwind emergency stimulus measures.
“In the present situation it is extremely important that we can have in the framework at the level of global finance and the global economy a strong dollar, as the authorities in the U.S. are saying,” Trichet told lawmakers in Brussels today. “The solidity of the dollar is very important.”
Trichet’s comments come after a 15 percent slide in the dollar against the euro since February that’s threatening to hamper Europe’s recovery from the worst recession since World War II. With the Group of 20 nations pledging to rebalance the global economy away from a trade deficit in the U.S., the risk for the ECB is that its economy feels the pain of further dollar adjustment.
The euro fell from $1.4661 to as low as 1.4627 after Trichet’s remarks.
“It would be premature to declare the crisis over,” Trichet said. “Now is not the time” for the ECB to unwind its stimulus measures. “However, at some point in time an exit strategy will have to be implemented. The ECB has an exit strategy and stands ready to put it into action when the time comes.”
Non-Standard Measures
The Frankfurt-based central bank has lowered its benchmark lending rate to a record low of 1 percent to fight Europe’s worst recession since World War II. It is also employing “non- standard measures” to get credit flowing through the economy again, lending banks as much money as they need at the benchmark rate and buying covered bonds.
“The euro-area economy shows signs of stabilization,” Trichet said. “In the period ahead we expect to see a very gradual recovery.”
The ECB this month predicted economic growth in the 16- nation euro region of about 0.2 percent in 2010, revising a June forecast for a 0.3 percent contraction. In 2009, the economy will shrink about 4.1 percent, less than the 4.6 percent contraction predicted three months earlier.
G-20 leaders concluded a summit in Pittsburgh on Sept. 25 promising to pursue policies that bring the world economy into greater balance. That initiative may require the dollar to fall further so as to narrow the U.S. trade deficit, according to economists at Morgan Stanley.
Dollar’s Dominance
Trichet’s comments came the same day that World Bank President Robert Zoellick said the U.S. dollar’s dominance as the world’s main reserve currency will be challenged as the financial crisis reshapes the global economy.
“There is every reason to believe that the euro’s acceptability could grow,” Zoellick said. “Of course, the U.S. dollar is and will remain a major currency. But the greenback’s fortunes will depend heavily on U.S. choices” on inflation, the budget deficit and financial oversight, he said.
U.S. Treasury Secretary Timothy Geithner last week defended the dollar’s role as the world’s reserve currency. The U.S. has a “special responsibility” to preserve confidence in its financial system and “sustain the dollar’s role as the principal reserve currency in the international financial system,” he said Sept. 24 in Pittsburgh.
Trichet also urged banks to accelerate lending to their economies. The global recession has made banks reluctant to lend and also eroded demand for debt. In Europe, loans to the private sector rose 0.1 percent in August from a year earlier, the slowest growth since records began in 1991, the ECB said last week.
There’s a “gradual improvement in financing conditions which is expected to support demand for credit in the period ahead,” Trichet said. “It is for this reason that the Governing Council continues to regard ECB interest rates as appropriate.”
“Our message to banks is clear: do your job,” he added.
To contact the reporters on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net; Christian Vits in Frankfurt at cvits@bloomberg.net
Last Updated: September 28, 2009 12:48 EDT
Yen Falls Versus Euro on Stocks Rally, Europe Economy Optimism
By Yoshiaki Nohara
Sept. 29 (Bloomberg) -- The yen fell against the euro for the first time in six days as Asian stocks rebounded and before a report forecast to show European confidence in the economy improved, damping demand for Japan’s currency as a refuge.
Japan’s currency declined against the dollar as Japanese Trade Minister Masayuki Naoshima asked for a probe into how a stronger yen will hurt exporters, stoking speculation Japan may intervene in currency markets. The dollar traded near a two-week high against the euro after European Central Bank President Jean-Claude Trichet said it’s “extremely important” to have a strong greenback.
“Economic fundamentals are improving, boosting demand for risk taking,” said Koji Fukaya, a senior currency strategist in Tokyo at Deutsche Bank AG. “Japan’s policy makers can’t just let the yen rise, which will hurt companies’ profits and reduce jobs.”
The yen dropped to 131.45 per euro as of 9:52 a.m. in Tokyo from 131.06 in New York yesterday. The yen declined to 90.01 per dollar from 89.63 yesterday, when it touched 88.24, the strongest level since Jan. 23. The dollar was at $1.4606 per euro from $1.4622. Yesterday it touched $1.4565 per euro, the highest level since Sept. 15.
The yen declined against all of its 16 major counterparts as Asian shares followed gains by U.S. equities. Japan’s Nikkei 225 Stock Average rose 0.8 percent, rebounding from yesterday’s 2.5 percent tumble, after the U.S.’s Standard & Poor’s 500 Index added 1.8 percent. MSCI’s Asian Pacific Index increased 0.3 percent.
Risk Appetite
“Risk appetite has improved because of the big bounce in U.S. equities,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “Speculators who have been betting on the yen’s strength should probably start reconsidering whether they should still be long on the yen.”
The European Commission in Brussels will report today that economic confidence in the euro zone gained to 82.7 this month from 80.6 in August, according to the median estimate of economists in a Bloomberg News survey. That would be the highest since September 2008.
Naoshima asked bureaucrats to investigate the yen’s effect on Japanese exporters, Yosuke Kondo, parliamentary secretary for the Trade Ministry, told reporters in Tokyo yesterday.
Fujii Comments
Japanese companies said they can remain profitable as long as the yen trades at 97.33 per dollar or weaker, according to a Cabinet survey released on April 22. Exports account for 12 percent of Japan’s economy, compared with 6 percent in the U.S.
The yen pared gains versus the dollar yesterday after Finance Minister Hirohisa Fujii said at a forum co-hosted by Bloomberg that he “never said I will leave the yen to strengthen” and that he didn’t necessarily accept gains in the currency.
Fujii earlier said he didn’t support a “weak yen,” fueling speculation the government won’t act to stem the currency’s 16 percent appreciation against the dollar in the past year. Central banks intervene in foreign-exchange markets by selling and buying currencies.
Yen Momentum
“The yen’s recent gains, fueled by market interpretation of Fujii’s comments, are losing momentum,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc. a unit of Nippon Telegraph & Telephone Corp.
A strong currency reduces the value of overseas profits for Japanese companies. Large Japanese manufacturers forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released July 1.
The dollar rose against the euro after Trichet told lawmakers in Brussels the “solidity of the dollar is very important.” The euro reached a one-year high of $1.4844 on Sept. 23, making European exports more expensive.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.
Last Updated: September 28, 2009 21:08 EDT
Sept. 29 (Bloomberg) -- The yen fell against the euro for the first time in six days as Asian stocks rebounded and before a report forecast to show European confidence in the economy improved, damping demand for Japan’s currency as a refuge.
Japan’s currency declined against the dollar as Japanese Trade Minister Masayuki Naoshima asked for a probe into how a stronger yen will hurt exporters, stoking speculation Japan may intervene in currency markets. The dollar traded near a two-week high against the euro after European Central Bank President Jean-Claude Trichet said it’s “extremely important” to have a strong greenback.
“Economic fundamentals are improving, boosting demand for risk taking,” said Koji Fukaya, a senior currency strategist in Tokyo at Deutsche Bank AG. “Japan’s policy makers can’t just let the yen rise, which will hurt companies’ profits and reduce jobs.”
The yen dropped to 131.45 per euro as of 9:52 a.m. in Tokyo from 131.06 in New York yesterday. The yen declined to 90.01 per dollar from 89.63 yesterday, when it touched 88.24, the strongest level since Jan. 23. The dollar was at $1.4606 per euro from $1.4622. Yesterday it touched $1.4565 per euro, the highest level since Sept. 15.
The yen declined against all of its 16 major counterparts as Asian shares followed gains by U.S. equities. Japan’s Nikkei 225 Stock Average rose 0.8 percent, rebounding from yesterday’s 2.5 percent tumble, after the U.S.’s Standard & Poor’s 500 Index added 1.8 percent. MSCI’s Asian Pacific Index increased 0.3 percent.
Risk Appetite
“Risk appetite has improved because of the big bounce in U.S. equities,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “Speculators who have been betting on the yen’s strength should probably start reconsidering whether they should still be long on the yen.”
The European Commission in Brussels will report today that economic confidence in the euro zone gained to 82.7 this month from 80.6 in August, according to the median estimate of economists in a Bloomberg News survey. That would be the highest since September 2008.
Naoshima asked bureaucrats to investigate the yen’s effect on Japanese exporters, Yosuke Kondo, parliamentary secretary for the Trade Ministry, told reporters in Tokyo yesterday.
Fujii Comments
Japanese companies said they can remain profitable as long as the yen trades at 97.33 per dollar or weaker, according to a Cabinet survey released on April 22. Exports account for 12 percent of Japan’s economy, compared with 6 percent in the U.S.
The yen pared gains versus the dollar yesterday after Finance Minister Hirohisa Fujii said at a forum co-hosted by Bloomberg that he “never said I will leave the yen to strengthen” and that he didn’t necessarily accept gains in the currency.
Fujii earlier said he didn’t support a “weak yen,” fueling speculation the government won’t act to stem the currency’s 16 percent appreciation against the dollar in the past year. Central banks intervene in foreign-exchange markets by selling and buying currencies.
Yen Momentum
“The yen’s recent gains, fueled by market interpretation of Fujii’s comments, are losing momentum,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc. a unit of Nippon Telegraph & Telephone Corp.
A strong currency reduces the value of overseas profits for Japanese companies. Large Japanese manufacturers forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released July 1.
The dollar rose against the euro after Trichet told lawmakers in Brussels the “solidity of the dollar is very important.” The euro reached a one-year high of $1.4844 on Sept. 23, making European exports more expensive.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.
Last Updated: September 28, 2009 21:08 EDT
Friday, September 11, 2009
US Dollar Plunges To 7-month Low Against Japanese Yen
33 minutes ago
(RTTNews) - During early Asian deals on Friday, the US dollar plunged to a 7-month low against the Japanese yen and 1-month low versus the British pound. The dollar also edged down against the European currency and the Swiss franc.
The U.S. Labor Department revealed yesterday that initial jobless claims came in at 550,000 for the week ended September 5th, which was down 26,000 from the previous week's revised total of 576,000. Economists had expected jobless claims to come in at around 560,000.
Continuing claims, which measure the number of people receiving ongoing unemployment help, fell 159,000 to 6.088 million in the week ended August 29th.
Separately, the Commerce Department released a report showing that the U.S. trade deficit widened by much more than expected in July, with the value of imports increasing at a much faster pace than the value of exports.
The report showed that the trade deficit widened to $32.0 billion in July from a revised $27.5 billion in June. The deficit was much wider than the estimates of economists, who had expected a deficit of $27.3 billion.
Against the European currency, the US dollar edged down during early Asian deals on Friday. At 10:45 pm ET, the dollar touched a low of 1.4614 versus the euro, compared to 1.4583 hit late New York Thursday. The next downside target level for the dollar is seen around 1.457.
The US currency that closed Thursday's North American session at 1.6653 against the British pound declined to a 1-month low of 1.6709 during today's early Asian deals. If the US dollar falls further, 1.690 is seen as the next target level.
Yesterday, the Bank of England decided to maintain its interest rate for the sixth consecutive month and also voted to continue the GBP 175 billion asset purchase programme using central bank reserves.
As expected, the Monetary Policy Committee of the central bank decided to hold the official Bank Rate paid on commercial bank reserves at 0.5%. The rate now stands at the lowest level since the central bank was established in 1694. The previous change in the rate was a reduction of 0.5 percentage points in March 2009.
The MPC expects the asset purchase programme to take another two months to complete. The scale of the programme will be kept under review, the bank said in a statement.
Initially, the central bank introduced a GBP 75 billion programme of asset purchases financed by the issuance of central bank reserves on March 5. Later, the size of the quantitative easing was raised to GBP 125 billion on May 7 and again to GBP 175 billion on August 6.
Against the Swiss franc, the greenback traded down during Friday's early Asian trading. At 10:45 pm ET, the dollar-franc pair slipped to 1.0364, compared to Thursday's closing value of 1.0387. The pair is currently trading at 1.0369 with 1.032 seen as the next target level.
The US dollar plunged to 91.36 against the Japanese yen during early Asian deals on Friday. This set the lowest point for the dollar since February 13, 2009. On the downside, 90.2 is seen as the next target level for the U.S. currency. The dollar-yen pair closed Thursday's New York deals at 91.75.
Japan's economy grew in the April-to-June quarter, but not by as much as originally reported, a government report showed today.
Japan's gross domestic product increased 0.6 percent from the preceding quarter or 2.3 percent in annualized terms. The growth reported by the Cabinet office was below the preliminary estimate of 0.9 percent on-quarter growth and 3.7 percent annualized growth.
Capital spending was downwardly revised to 4.8 percent on quarter from the initial report of a 4.3 percent decline.
Looking ahead, Japan is set to release its consumer confidence data for August at 1:00 am ET Friday. The consumer confidence index is expected to come in at 40.2, up from 39.7 and the household consumer confidence is called at 40.5, up from 39.4.
In the European session today, the Italian industrial production data and the U.K. PPI reports are due for release.
Turning to the U.S., the Department of Commerce will release its import and export price reports for August at 8:30 am ET.
At 10:00 am ET, the Commerce Department is due to release its wholesale inventories report. Economists expect wholesale inventories at the end of July to show a 0.1% decline.
The preliminary reading of the University of Michigan's consumer sentiment index for September is due to be released at the same time. The report is expected to show that the consumer sentiment index rose to 67.5 in the month.
For comments and feedback: contact editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
(RTTNews) - During early Asian deals on Friday, the US dollar plunged to a 7-month low against the Japanese yen and 1-month low versus the British pound. The dollar also edged down against the European currency and the Swiss franc.
The U.S. Labor Department revealed yesterday that initial jobless claims came in at 550,000 for the week ended September 5th, which was down 26,000 from the previous week's revised total of 576,000. Economists had expected jobless claims to come in at around 560,000.
Continuing claims, which measure the number of people receiving ongoing unemployment help, fell 159,000 to 6.088 million in the week ended August 29th.
Separately, the Commerce Department released a report showing that the U.S. trade deficit widened by much more than expected in July, with the value of imports increasing at a much faster pace than the value of exports.
The report showed that the trade deficit widened to $32.0 billion in July from a revised $27.5 billion in June. The deficit was much wider than the estimates of economists, who had expected a deficit of $27.3 billion.
Against the European currency, the US dollar edged down during early Asian deals on Friday. At 10:45 pm ET, the dollar touched a low of 1.4614 versus the euro, compared to 1.4583 hit late New York Thursday. The next downside target level for the dollar is seen around 1.457.
The US currency that closed Thursday's North American session at 1.6653 against the British pound declined to a 1-month low of 1.6709 during today's early Asian deals. If the US dollar falls further, 1.690 is seen as the next target level.
Yesterday, the Bank of England decided to maintain its interest rate for the sixth consecutive month and also voted to continue the GBP 175 billion asset purchase programme using central bank reserves.
As expected, the Monetary Policy Committee of the central bank decided to hold the official Bank Rate paid on commercial bank reserves at 0.5%. The rate now stands at the lowest level since the central bank was established in 1694. The previous change in the rate was a reduction of 0.5 percentage points in March 2009.
The MPC expects the asset purchase programme to take another two months to complete. The scale of the programme will be kept under review, the bank said in a statement.
Initially, the central bank introduced a GBP 75 billion programme of asset purchases financed by the issuance of central bank reserves on March 5. Later, the size of the quantitative easing was raised to GBP 125 billion on May 7 and again to GBP 175 billion on August 6.
Against the Swiss franc, the greenback traded down during Friday's early Asian trading. At 10:45 pm ET, the dollar-franc pair slipped to 1.0364, compared to Thursday's closing value of 1.0387. The pair is currently trading at 1.0369 with 1.032 seen as the next target level.
The US dollar plunged to 91.36 against the Japanese yen during early Asian deals on Friday. This set the lowest point for the dollar since February 13, 2009. On the downside, 90.2 is seen as the next target level for the U.S. currency. The dollar-yen pair closed Thursday's New York deals at 91.75.
Japan's economy grew in the April-to-June quarter, but not by as much as originally reported, a government report showed today.
Japan's gross domestic product increased 0.6 percent from the preceding quarter or 2.3 percent in annualized terms. The growth reported by the Cabinet office was below the preliminary estimate of 0.9 percent on-quarter growth and 3.7 percent annualized growth.
Capital spending was downwardly revised to 4.8 percent on quarter from the initial report of a 4.3 percent decline.
Looking ahead, Japan is set to release its consumer confidence data for August at 1:00 am ET Friday. The consumer confidence index is expected to come in at 40.2, up from 39.7 and the household consumer confidence is called at 40.5, up from 39.4.
In the European session today, the Italian industrial production data and the U.K. PPI reports are due for release.
Turning to the U.S., the Department of Commerce will release its import and export price reports for August at 8:30 am ET.
At 10:00 am ET, the Commerce Department is due to release its wholesale inventories report. Economists expect wholesale inventories at the end of July to show a 0.1% decline.
The preliminary reading of the University of Michigan's consumer sentiment index for September is due to be released at the same time. The report is expected to show that the consumer sentiment index rose to 67.5 in the month.
For comments and feedback: contact editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
Tuesday, September 8, 2009
Tokyo FX volume falls as hedge funds leave
20-08-2009 - 10:55
TOKYO (Reuters) - Foreign exchange trading volume in Japan has fallen 16 percent this year after many hedge funds closed out investments during the global financial crisis, and Tokyo's turnover in spot trading now lags behind Singapore.
But steady turnover in FX swaps has helped Tokyo remain ahead of Singapore, its key rival as Asia's dominant FX trading hub, in overall foreign exchange product trading, data on traditional FX instruments from the Bank of Japan showed.
Average daily volume in spot, FX swaps, forwards and FX options traded in Japan fell 16 percent in April 2009 from a year ago to $254 billion (153.5 billion pounds), according to a Tokyo Foreign Exchange Market Committee Survey released last month.
But Tokyo's daily volume in spot FX trading alone slumped 33 percent to $70.2 billion from the same month last year, trailing behind Singapore's daily volume of $88.1 billion, where the decrease was only 6 percent.
The drop also exceeded falls in spot in other big FX centres, with New York volume falling 25 percent and London 20 percent.
Market players said hedge funds have slowly returned to the financial markets as global markets have stabilised this year, but Tokyo has failed to attract funds back for trading and this contributed to the particularly big drop in Tokyo's spot volume.
"Hedge funds are rebuilding 'risk-on' positions after stock markets hit their bottom in March. But they have been skipping the Tokyo market due to low liquidity," said Akira Hoshino, chair of the Tokyo Foreign Exchange Market Committee.
The world's largest forex trading centre remains London with total average daily turnover of $1.3 trillion, followed by New York with $527 billion in over-the-counter currency instruments. However both saw overall daily volume dropping by a quarter year-on-year.
According to the Bank for International Settlements' 2007 triennial survey, which used a different reporting methodology from the Tokyo committee, Japan was the fourth largest FX trading centre, with Switzerland ranked third and Singapore fifth.
Even though Hong Kong and Singapore are popular business locations for many hedge funds, their currency trading activity has tended to pick up during the European and U.S. day, prompting some market players to joke that the world's richest investors are asleep in Asian hours.
Market players say not only hedge funds but also Japanese institutional investors and investment trusts now often choose to trade in markets with better liquidity than Tokyo, such as London.
"In addition to the fact that activity by Japanese exporters fell due to a drop in exporting business, we did not see much action by domestic investors either," said Hoshino, who is also a chief manager of forex trading at the Bank of Tokyo-Mitsubishi UFJ.
In FX swaps, however, Tokyo was second behind London's $662.0 billion, with average daily volume of $158.9 billion and overtaking New York at $142 billion.
The drop in FX swaps was a much smaller 0.5 percent for Tokyo, compared with New York's 28 percent drop and London's 27 percent slide on the year, BOJ data shows.
Market players attributed this divergence to high foreign demand for the yen as a funding currency for trading or investments.
In April, Japanese banks were active in FX swaps to procure dollar funds, while foreign banks used them to borrow yen, market players said.
(Reporting by Shinji Kitamura; writing by Satomi Noguchi; Edited by Joseph Radford)
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