Yen surges on fresh wave of carry-trade unwinding. The Yen jumped higher across the board hitting three-month high against the Dollar and gaining sharply against Sterling. The Japanese currency rallied also helped by a pull-back from riskier investments. Dealers cited hedge funds as heavy sellers, helping drive all major currencies down against the Yen. Analysts said that after the battering high-yielding currencies have taken last week, investors would be reluctant to view the recent sell-off as buying opportunity until a sense of calm had returned to the market…
News and Events:
The Yen rose to an 11-week high against the Dollar on Friday, its best week advance in 14 months, as investors unwound bets on riskier assets that were financed by borrowing the Japanese currency. The Yen got a boost after St-Louis Federal Reserve President Poole said he saw nothing disruptive in carry trades, or bets on high-yielding currencies financed by borrowing in the currencies of countries with low interest rages such as Japan and Switzerland. Traders said Yen advance accelerated in Friday Afternoon and this morning and the Dollar fell through some technical supports and also cited hedge funds as heavy sellers, helping drive all major currencies down against the Yen. Analysts said that after the battering high-yielding currencies have taken last week, investors would be reluctant to view the recent sell-off as buying opportunity until a sense of calm had returned to the market. Trader said they are keeping a close eye on Stock prices to understand where the unwinding of carry-trades may end its course. Last week, heavy falls in global Stock Markets have left investors ready to cut other risky trades in their portfolios.
Market will be awaiting this week�s US economic indicators, including monthly payrolls data on Friday, to see if the figures provide any more reason to expect the Federal Reserve to cut interest rates. A series of Central Bank meetings are also due this week; European Central Bank, Bank of Canada, Australia and New Zealand and Bank of England. The European Central Bank is already expected to raise rates by 0.25% to 3.75%.
On Friday, UsdJpy was down -0.59% to 116.12 after slipping as low as 115.94, while the EurJpy ended -0.66% to 153.08 and GbpJpy -1.05% to 224.63. GbpUsd went lower to 1.9345 -0.46%.
Today’s Key Issues:
Euro 9:00 GMT: February Euro-zone PMI Services Survey expected 57.6 vs 57.9
GB 9:30 GMT: February PMI Service Survey expected 59 vs 59.2
CAD 15:00 GMT: February Ivey Purchasing Manager Index expected 55 vs 53.8
US 15:00 GMT: February ISM non-manufacturing is expected 57.3 vs 59
US 18:00 GMT: Fed�s Poole speaks on inflation and the economy
US 19:00 GMT: Fed�s Warsh speaks on liquidity at Bankers Conference
US 20:00 GMT: Fed�s Kroszer speaks on Community Banks in Washington
The Risk Today:
EurUsd broke down 1.3150 support; with further weakness, a break of 1.3074 would confirm the short term negative trend. There market would target 1.2990 (61.8% retracement of the 1.2865 to 1.3191 advance). On the Upside, market looks at 1.3250 (76.4% retracement of the 1.3368-1.2865 decline) and 1.3290 trendline resistance. Initial resistance is located at 1.3212 followed by 1.3260 late Feb high.
GbpUsd has broken out at the bottom of 1.9403 � 1.9750 trading range. This would open the risks for a deeper fall towards 1.9146. Minor support holds at 1.9220. Initial resistance is 1.9344.
UsdJpy continues to slide and the sharp losses have now opened 114.33 December low. Look for resistance this morning at 116.79 Friday high. But there, only a rebound above 118 pivot point would end the downtrend.
UsdChf maintains a weaker tone having broken to fresh lows and is approaching support at 1.2110, early January low. Continued weakness would open 1.2043 (76.4% of the 1.1879-1.2575 decline) and expose 1.1980 December low. Key resistance this morning is at 1.2263.
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Resistance and Support:
