| 3/10/2008
8:00 PM: EUR/$..1.5345 $/JPY..101.52 GBP/$..2.0083
$/CHF..1.0180 AUD/$..0.9174 $/CAD..0.9958
USD Plummets to 8-year Low vs JPY
The dollar come under aggressive selling pressure
against the yen, falling to its lowest level since
2000 at 101.38 as heightened risk aversion prompted
a sharp rally by the Japanese currency. Persistent
fears of instability in the US financial markets
and burgeoning concerns about an economic recession
have plagued the greenback. However, the currency's
rapid descent has prompted a renewed bout of verbal
intervention in an effort to contain further deterioration.
Euro Buoyed
With the euro maintaining its strength near record
levels against the dollar, Eurozone officials
have stepped up their rhetoric to temper additional
appreciation. ECB President Trichet said he was
concerned by excessive moves in foreign exchange,
adding that excessive volatility and disorderly
fx moves are undesirable. He also said that he
notes with ?extreme attention US statement that
strong dollar policy is in US interest?. Nonetheless,
given the barrage of criticism over China?s currency
regime and accusations of currency manipulation,
Trichet?s comments are viewed as little more than
jawboning rather than a signal of coordinated
intervention.
The Eurozone calendar was light at the start
of the week, with the release of Germany?s January
trade surplus, largely in line with consensus
estimates at 16.1 billion euros, up from 15.6
billion euros from December. In the coming session,
traders will look ahead to Germany?s February
wholesale price index and the March ZEW sentiment
survey. The February WPI is see edging higher
on an annualized basis to 6.8% from 6.6% while
the monthly report is seen declining to 0.6% versus
1.4%. Meanwhile, Germany?s ZEW sentiment survey
is expected to worsen to minus 40.0 from minus
39.5 while the current conditions survey is seen
deteriorating to 30.4 versus 33.7.
Yen Powers to 8-year High
Heightened risk aversion and more declines in
global equity bourses propelled the yen to its
highest level versus the dollar since 2000 at
101.38. We expect the yen to continue edging higher
with a near-term target of 100.
Economic data from Japan this week will see the
minutes from the BoJ monetary policy meeting,
Q4 GDP, and January industrial production. The
Bank of Japan is largely expected to remain on
hold this year with slight risk that the BoJ could
possibly ease rates. Nonetheless, we favor the
yen to continue to benefit from increased risk
aversion and see the currency breaking through
the 100-level over the coming months.
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