Yen Dropped As Global Equity Rise Strengthen Carry Trades

Carry trades regained momentum sending Yen down to record lows against some of its counterparts as investors shifted money to high yielding riskier assets outside Japan. Share prices surged leading gains from the US market and expectations of higher earnings. Bonds prices rose too as investors expect that consumer prices fell this month.


Nippon Oil to pay in yen for Iran crude:
Nippon Oil Corporation, Japan’s biggest refiner, is set to switch payment for the crude it buys directly from Iran from dollars to yen by October, its chairman Fumiaki Watari said yesterday. An industry source said earlier that Nippon Oil was the first Japanese customer to accept Iran’s formal request last week to switch to yen, in line with Tehran’s move over the past year to limit dollar-denominated trade.
Source: Gulf Daily News
Japan and North Korea to Improve Ties, Shiozaki Says:
Japan and North Korea agreed to make efforts to improve relations following a meeting in Beijing yesterday between negotiators from both countries, Japan’s top government spokesman said. The negotiators’ meeting yesterday was the first time that representatives of the two nations have met since March. Envoys of six nations, which also include the U.S., South Korea, China and Russia, are scheduled to conclude talks in Beijing today on dismantling North Korea’s nuclear weapons program.
Opposition Party Gains in Popularity in Japan Election Surveys:
The opposition Democratic Party of Japan has gained in popularity before the country’s July 29 Upper House election, two newspaper surveys show. Twenty-eight percent of the people surveyed by the Yomiuri newspaper said they would vote for the opposition Democratic Party of Japan in the proportional representation portion of the parliamentary election. Twenty percent said they would vote for the governing Liberal Democratic Party.
Yen traded at record low against Euro and near 16 year against Aussie as gains in global stock market increased carry trades. According to the calculations done by Credit Suisse, there is a 69 percent chance that the central bank will raise rates in August down from 72 percent a week ago. Japanese consumer prices release next week should help give better picture about the economic growth and the direction of interest rates. According to the reports released by Ministry of Finance today, Japanese investors bought 56.8 billion yen in overseas bonds and notes last week. Against the Dollar, Yen lost its strength marginally. As of 3:00 EST USDJPY was trading at 122.35.

Japanese shares soared today as did the other Asian bourses leading the record gains in Dow Industrial Average yesterday. The gains were mostly led by steelmakers and electronic manufacturers as investors expected profits higher than estimates. Automakers including Honda Motor Co. advanced after parts supplier Riken Corp. said that factory shall resume operations next week after being closed since the recent earthquake. Oil trading houses rose too after oil reached highest since August 2006. Nikkei futures expiring in September advanced 0.2 percent to 18,170.

Japanese Bonds rose consecutively fourth time today on speculation that consumer prices will fall further. The yield on the 10-year bond fell 0.5 basis points to 1.895. Bond futures for September delivery climbed 0.24 to 132.08.