Yen
Rallies, Traders Await Jobs
The yen rallied sharply across the board, advancing
to 186.20 against the sterling, 150.59 versus
the euro and 105.71 to the dollar. With global
equity bourses posting sharp losses, traders scaled
back carry trades as a result of the heightened
risk aversion. Meanwhile, the greenback jumped
to its highest level since October 2007 against
the euro at 1.4213 and a fresh 2 ½-year
high versus the pound at 1.7562.
The key highlight in the Friday session will
be the US labor report for August, with consensus
estimates calling for a loss of 75k jobs in non-farm
payrolls versus a loss of 51k jobs from July.
The unemployment rate is seen remaining unchanged
at 5.7% while average earnings are also expected
to hold steady at 0.3%.
Although US economic fundamentals continue to
deteriorate it remains to be seen when a shift
toward an easing stance by the FOMC will materialize
given the current inflationary outlook. Dallas
Fed President Fisher expressed concerns over inflation,
saying "it is pretty clear that trend consumer
price inflation has accelerated over the past
few months". Further, he added that "while
it seems pretty clear that economic momentum is
slowing, the jury is out on whether lesser momentum
will be sufficient to translate into the relief
on the price front over the intermediate to longer
term". Fisher expects the economy will "suffer
anemic growth for the current and perhaps next
couple of quarters". We expect the Fed to
leave rates unchanged over the remainder of the
year, and foresee a shift toward interest rate
cuts in Q1 2009.
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