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Japan: A Couple of Observations

September 30, 2010
Japan appears to have made the same mistake twice now. After demonstrating a willingness to confront China over contested territory, it backed down as China seemed to escalate the issue. In a similar vein, Japan was willing to take on the foreign exchange market by selling JPY2.125 trillion yen (confirmed by the MOF today), which appears to be a r…
Japan: A Couple of Observations Japan: A Couple of Observations Reviewed by Marc Chandler on September 30, 2010 Rating: 5
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Europe, Australia, New Fed Governors Confirmed

September 30, 2010
The euro was already recovering from the bout of profit-taking in Asia that had seen a low recorded just ahead of support pegged at $1.3550, when news that the European banks borrowed considerably less from the ECB than anticipated and this sent the euro to $1.3675. Recall that 225 bln euro refi operations were maturing today.
These included the r…
Europe, Australia, New Fed Governors Confirmed Europe, Australia, New Fed Governors Confirmed Reviewed by Marc Chandler on September 30, 2010 Rating: 5
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FX Overview: Dollar on Backfoot

September 30, 2010
The US dollar remains on its back foot. The main driver remains the contrast between the likely trajectory of Fed policy in contrast to the ECB. Moody’s 1-notch downgrade of Spanish credit rating and news that Anglo-Irish needs another 6.4 bln euros on top of the 22.9 bln already injected, and possibly another 5 bln on top of that (in a stress cas…
FX Overview: Dollar on Backfoot FX Overview: Dollar on Backfoot Reviewed by Marc Chandler on September 30, 2010 Rating: 5
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CAD-MXN Opportunity

September 29, 2010
The Canadian dollar has under-performed this month. Among the G10 currencies, only sterling (+2.2%) and the yen (+1%) have done worse than the Loonie, which is up about 2.4% against the greenback. In the current environment, with the prospects of QEII in the US, Canada seems markedly better positioned. Since Bernanke's Jackson Hole speech the …
CAD-MXN Opportunity CAD-MXN Opportunity Reviewed by Marc Chandler on September 29, 2010 Rating: 5
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The Dollar: Punishment Now, Reward Later

September 29, 2010
The divergent paths between the ECB on one hand and the Fed, BOE and BOJ on the other hand are very stark. The ECB seems determined to reduce the extraordinary liquidity provisions as they expire at the end of the year. In contrast, the market seems to be acting as if new bond purchases by the Federal Reserve are a done deal. Japan is moving to pr…
The Dollar: Punishment Now, Reward Later The Dollar: Punishment Now, Reward Later Reviewed by Marc Chandler on September 29, 2010 Rating: 5
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Quick FX Update

September 29, 2010
The US dollar remains soft, but the downside momentum seen in recent days appears to be ebbing as new catalysts are awaited. The dollar’s slide is not over and bounces are expected to be shallow and short-lived. The main catalyst continues to current interest rate differentials and their likely trajectory.
The contrast was underscored yesterday as…
Quick FX Update Quick FX Update Reviewed by Marc Chandler on September 29, 2010 Rating: 5
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Italy Vote of Confidence Tomorrow

September 28, 2010
Belgium does has a caretaker government. It has ben unable to form a government since the June election after the previous government collapsed in April. The Netherlands is also struggling to put a coalition together. Italy comes to the fore tomorrow with a vote of confidence in the Berlusconi government that has been shaken by a split in the cent…
Italy Vote of Confidence Tomorrow Italy Vote of Confidence Tomorrow Reviewed by Marc Chandler on September 28, 2010 Rating: 5
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Consumer Lender Woes in Japan

September 28, 2010
Earlier today, Japan's second largest consumer lender, Takefuji sought legal protection of bankruptcy. The source of its woes, and apparently others in that space, is that the borrowers were overcharged interest.
Japan's regulator says that Japanese consumers were overcharged some JPY4.4 trillion. Takefuji has over a million clients. About…
Consumer Lender Woes in Japan Consumer Lender Woes in Japan Reviewed by Marc Chandler on September 28, 2010 Rating: 5
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Irish Update

September 28, 2010
Irish Prime Minister Cowen is trying to reassure the markets. With European central banks reportedly buying Irish bonds (and having appeared to step up their bond purchases a little in recent weeks), the credit default swap market may offer a cleaner read and there the markets are implying the greater risk so far.
But Cowen says not to worry. Irel…
Irish Update Irish Update Reviewed by Marc Chandler on September 28, 2010 Rating: 5
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European Woes, but Euro Recovery

September 28, 2010
ECB’s Stark comments are more important today that increased speculation of a downgrade in Ireland and Spain. In an unusually revealing comment, the ECB’s Stark indicated that a number of the unconventional liquidity measures that are due to expire at the end of the year will in fact do so. This is unusual because it because such policy announceme…
European Woes, but Euro Recovery European Woes, but Euro Recovery Reviewed by Marc Chandler on September 28, 2010 Rating: 5
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Dollar Reverses Lower, but Consolidative Session Likely

September 28, 2010
The US dollar initially extended yesterday’s recovery, but reverse lower in Europe, despite elevated tensions in the periphery of Europe.
Optimistic comments by ECB’s Stark, seeming to signal another step on the exit strategy, German industry association seeing no threat in the current euro level may have helped fuel the euro’s recovery from the t…
Dollar Reverses Lower, but Consolidative Session Likely Dollar Reverses Lower, but Consolidative Session Likely Reviewed by Marc Chandler on September 28, 2010 Rating: 5
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Euro, Yen and the S&P 500 and Interest Rates: Some Thoughts

September 27, 2010
In mid-June the dollar-yen rate was correlated with the S&P 500 nearly 91% (r2=0.909). It trended lower until the middle of August, falling to around 31% and recovered to 46% by Sept 10 and has since trended lower and now back to 31%. This is the lower end of the three-month rolling correlation has been since April when it was negative.
The lo…
Euro, Yen and the S&P 500 and Interest Rates: Some Thoughts Euro, Yen and the S&P 500 and Interest Rates: Some Thoughts Reviewed by Marc Chandler on September 27, 2010 Rating: 5
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Color on the Currency Reform for Fair Trade Act

September 27, 2010
The US House Ways and Means Committee approved the Currency Reform for Fair Trade Act before the weekend. The full House of Representatives will vote on the measure, and likely approve it on Wed.
It then goes to the Senate. The Senate version is a bit different and would need to be reconciled with the House version, if it passed the Senate. The wo…
Color on the Currency Reform for Fair Trade Act Color on the Currency Reform for Fair Trade Act Reviewed by Marc Chandler on September 27, 2010 Rating: 5
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Markets Today

September 27, 2010
The news stream from Europe coincided with the technical need of a correction after the early test in Asia on the $1.35 level, which coincides with a 50% retracement of the euro’s decline in the Nov 09-May 10 period. The news stream of EC concerns, tension between those who want for central authority in Europe and those that don’t, and problems in…
Markets Today Markets Today Reviewed by Marc Chandler on September 27, 2010 Rating: 5
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Thumbnail Sketch of Capital Markets on Monday

September 27, 2010
The US dollar is consolidating last week’s losses in mostly quiet turnover. The euro is the weakest of the majors. It was turned back from the test on the $1.35 area following media reports that the EC lacks confidence in three German lenders (Der Spiegel) and that focus on an unresolved fissure at the heart of Europe (Wall Street Journal).
News t…
Thumbnail Sketch of Capital Markets on Monday Thumbnail Sketch of Capital Markets on Monday Reviewed by Marc Chandler on September 27, 2010 Rating: 5
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Update: India, Brazil, Mexico

September 24, 2010
India: Earlier today India lifted the cap on foreign ownership of government and corporate bonds. This had been anticipated, but it runs counter to the rash of media reports suggesting that rise of beggar-thy-neighbor policies after last week's BOJ intervention. Foreign investors can now hold as much as $10 bln worth of Indian government bonds…
Update: India, Brazil, Mexico Update: India, Brazil, Mexico Reviewed by Marc Chandler on September 24, 2010 Rating: 5
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Market Shrugs Off Good Durables Data and Sells Dollars

September 24, 2010
Despite the soft headline, US August durable goods orders report was stronger than expected but this has been insufficient to spur a recovery in the dollar. Nevertheless, the durable goods orders are consistent with the recent string of economic data suggesting that the US economy might be stabilizing after the disappointing Q2.
The July series wa…
Market Shrugs Off Good Durables Data and Sells Dollars Market Shrugs Off Good Durables Data and Sells Dollars Reviewed by Marc Chandler on September 24, 2010 Rating: 5
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Euro Outlook: Drivers, Direction and Degree

September 24, 2010
As the third quarter winds down, it is helpful to consider the outlook for the euro-dollar exchange rate in the period ahead. Three dimensions are of particular interest, drivers, direction, and degree. We place our conclusions first, and then provide the chain of reasoning.
Conclusion After rallying about 6.25% since September 10, the euro may ent…
Euro Outlook: Drivers, Direction and Degree Euro Outlook: Drivers, Direction and Degree Reviewed by Marc Chandler on September 24, 2010 Rating: 5
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Friday's Drivers: Japan and IFO

September 24, 2010
Japan’s markets re-opened earlier today after yesterday’s holiday. Given the recovery of the yen in recent trading, the market was particularly sensitive to the threat of intervention.
After a quiet start to the Asian session two things happened around the same time. First, Reuters reported talk that the BOJ Governor was preparing to resign. This …
Friday's Drivers: Japan and IFO Friday's Drivers: Japan and IFO Reviewed by Marc Chandler on September 24, 2010 Rating: 5
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Dollar Heavy

September 24, 2010
The US dollar is broadly weaker as the week draws to a close. The feature during Asian hours was speculation of BOJ intervention and rumors that the governor of the BOJ was going to resign. The dollar rallied to JPY85.40 before returning to the JPY84.20 area, new marginal lows since last week’s intervention.
Dollar Heavy Dollar Heavy Reviewed by Marc Chandler on September 24, 2010 Rating: 5
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Zloty Leads EMEA Lower

September 23, 2010
The Polish zloty is the weakest of the central and east European currencies today. News that the cental bank had considered hiking rates 50 bp at its last meeting, but decided to leave rates steady last month at the record low 3.5%, has spooked the Polish bond market and this in turn is weighing on the stock market, pushing it down from five month…
Zloty Leads EMEA Lower Zloty Leads EMEA Lower Reviewed by Marc Chandler on September 23, 2010 Rating: 5
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Color on Weekly Jobless Claims

September 23, 2010
The weekly jobless claims are not often the stuff that moves the foreign exchange market, but the disappointment with today's data is noteworthy and hitting the the fx market as the foreign currencies began recovering from the profit-taking earlier today.
What makes today's report particularly important is that it coincides with week that …
Color on Weekly Jobless Claims Color on Weekly Jobless Claims Reviewed by Marc Chandler on September 23, 2010 Rating: 5
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Europe, Australia, China

September 23, 2010
The most important economic report today was the euro zone’s flash September PMI. It was weaker than expected and suggests that market participants may not have adjusted their expectations adequately after the robust growth posted by the region in Q2. Manufacturing reading came in at 53.6, down from 55.0 in August. The consensus had expected a mil…
Europe, Australia, China Europe, Australia, China Reviewed by Marc Chandler on September 23, 2010 Rating: 5
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Dollar Enjoys Upside Correction, Look to Fade

September 23, 2010
The US dollar is recouping some of its recent losses against most of the major and emerging market currencies. Softer than expected New Zealand GDP, followed by the disappointing euro zone flash PMI, the renewed widening of interest rate spreads in Europe and heavier tone in the equity markets appears to have helped spark what appears to be largel…
Dollar Enjoys Upside Correction, Look to Fade Dollar Enjoys Upside Correction, Look to Fade Reviewed by Marc Chandler on September 23, 2010 Rating: 5
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China, Japan and the US

September 22, 2010
US President Obama is scheduled to meet Chinese Premier Wen tomorrow on the sidelines of the UN meeting. Reports also suggest a bilateral meeting with Japanese Prime Minister Kan may take place.
Even though the meetings will be separate, the heads of state of the three largest economies in the world will meet. There is much focus on the yuan and s…
China, Japan and the US China, Japan and the US Reviewed by Marc Chandler on September 22, 2010 Rating: 5
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Asian Currencies Rock

September 22, 2010
Excuse the pun, I'm may be getting up there in age, but I still think I have a sense of humor.
Holidays in Taiwan, China and South Korea closed those local markets but this simply shifted global investors focus to Malaysia, Thailand and Singapore.
The ringgit and baht recorded new 13-year highs, while the Singapore dollar made new record highs…
Asian Currencies Rock Asian Currencies Rock Reviewed by Marc Chandler on September 22, 2010 Rating: 5
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Fed and the Dollar

September 22, 2010
Several forces had begun working against the US dollar over the past couple of weeks. Our work has tended to emphasize the sifting interest rate differentials, market positioning and technical factors. The FOMC statement further pushes the market in the direction it was already headed.
The market’s response to the FOMC statement, taking 10-year Tr…
Fed and the Dollar Fed and the Dollar Reviewed by Marc Chandler on September 22, 2010 Rating: 5
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Capital Markets Overview

September 22, 2010
The US dollar continues to trade heavily in the aftermath of the FOMC statement that underscored the Federal Reserve’s readiness to move. Although activity has been choppy the direction is clear. The euro joined the other major currencies by moving above its 200-day moving average yesterday. Follow through buying today has lifted the euro through …
Capital Markets Overview Capital Markets Overview Reviewed by Marc Chandler on September 22, 2010 Rating: 5
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Consensus Right on FOMC, Dollar Slumps

September 21, 2010
The FOMC statement was in line with the consensus expectations, officials have left the door open to additional easing if necessary. Even if the staff revised down GDP and inflation forecasts and unemployment up, the Fed sticks with its assessment that the conditions are in place for somewhat stronger growth. The Fed did tweak its inflation assess…
Consensus Right on FOMC, Dollar Slumps Consensus Right on FOMC, Dollar Slumps Reviewed by Marc Chandler on September 21, 2010 Rating: 5
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CNBC: Analyze This, Fed's Move CNBC: Analyze This, Fed's Move Reviewed by magonomics on September 21, 2010 Rating: 5
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Brazil Getting Serious about BRL

September 21, 2010
Brazilian officials are getting more serious about curbing the real's strength. First, the central bank appears to have stepped up the amount of intervention and has been conducted two auctions a day to buy dollars since Sept 8. Local contacts estimate intervention to have run $1 bln a day for most of the last week. To put that in perspective,…
Brazil Getting Serious about BRL Brazil Getting Serious about BRL Reviewed by Marc Chandler on September 21, 2010 Rating: 5
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It is All About the Fed

September 21, 2010
Today’s FOMC meeting is the main event of the week. The focus is of course on the statement. The consensus expects language that underscores its willingness to adopt additional measures if necessary. The discussion about those additional measures has focused on additional Treasury purchases. A Bloomberg poll of 1400 subscribers found that roughly …
It is All About the Fed It is All About the Fed Reviewed by Marc Chandler on September 21, 2010 Rating: 5
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Dollar Mixed, Euro in Play

September 21, 2010
The US dollar is trading narrowly mixed against most of the major currencies ahead of the FOMC meeting. The euro’s recovery, after disappointing price action late Friday and yesterday, has brought it back to within striking distance of five-week highs set last week. Favorable reception to peripheral European bond auction helped extend the already …
Dollar Mixed, Euro in Play Dollar Mixed, Euro in Play Reviewed by Marc Chandler on September 21, 2010 Rating: 5
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Impact of Yen Intervention

September 20, 2010
Many people, including the governor of the central bank of South Korea, claim that unilateral BOJ intervention will not work. And yet it has. Without repeating its operation, the yen remains pinned near the intervention-inspired lows.
In addition to the spot market reaction--the developments in the options market suggest another dimension of the B…
Impact of Yen Intervention Impact of Yen Intervention Reviewed by Marc Chandler on September 20, 2010 Rating: 5
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NY Sees Widening European Spreas and Sells the Euro

September 20, 2010
European investors seemed unperturbed by the new strains in the European bond market and had bid the euro to $1.3120. North American traders seem more concerned as they were before the weekend. The euro has moved back toward the session lows--set in thin early Asian activity (Japan markets were closed) near $1.3035. Irish and Portugal bonds are un…
NY Sees Widening European Spreas and Sells the Euro NY Sees Widening European Spreas and Sells the Euro Reviewed by Marc Chandler on September 20, 2010 Rating: 5
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Pace of Equity Flows into Asia are Accelerating

September 20, 2010
Asian equities have been a market darling this year, but the pace of inflows have increased in recent weeks.
At around $534 mln, foreign inflows into Indonesia this month after nearly a quarter of the entire year's. The $222 mln inflow into Philippine shares already this month is nearly half of the year-to-date amount. Foreign investors have b…
Pace of Equity Flows into Asia are Accelerating Pace of Equity Flows into Asia are Accelerating Reviewed by Marc Chandler on September 20, 2010 Rating: 5
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Europe, FOMC, Sino-Japanese Rift

September 20, 2010
News reports appear to be playing down the fears from the end of last week that Ireland and Portugal may have to turn to the IMF/EU for support. Of course there will be official admission until the very last minute. The 440 bln euro European Financial Stability Facility is designed for this eventuality. Just today Moody’s assigned triple-A rating …
Europe, FOMC, Sino-Japanese Rift Europe, FOMC, Sino-Japanese Rift Reviewed by Marc Chandler on September 20, 2010 Rating: 5
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Monday Overview

September 20, 2010
The US dollar is mostly lower, surrendering some of its pre-weekend gains, against most of the major currencies. Sterling is the notable exception. It is heavy in the wake of a drop Righmove’s house price index, for the third consecutive month and some mortgage and money supply data (M4 contracted by 0.2%).
Japan’s markets were closed today. The d…
Monday Overview Monday Overview Reviewed by Marc Chandler on September 20, 2010 Rating: 5
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Observations Early in the Pacific Century

September 17, 2010
The economic historian Arnold Toynbee argued that civilization began in the East, expanded around the world, and will return to the East. Even if expressed somewhat differently, many people seem to believe that the 21st century will be a Pacific century.
The center of the world economy for the last couple of centuries has been the Northern Atlanti…
Observations Early in the Pacific Century Observations Early in the Pacific Century Reviewed by Marc Chandler on September 17, 2010 Rating: 5
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Key Forces and Implications

September 17, 2010
The summer lull in the foreign exchange market ended abruptly this week and the reverberations will likely carry into next week’s activity. As the week draws to a close, it might be helpful to summarize them and draw out some implications.
BOJ Intervention: The first intervention in six-years, and what still appears to be a record single day amoun…
Key Forces and Implications Key Forces and Implications Reviewed by Marc Chandler on September 17, 2010 Rating: 5
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Quick FX Overview

September 17, 2010
The US dollar is mostly softer, but consistent with this week’s developments, the Japanese yen and Swiss franc are laggards. Additional intervention was not seen and the dollar has held above the JPY85.50. Japanese exporters are thought to have been helping provide a cap in front of JPY86.00.
The euro and sterling are trading near 5-week highs. Lo…
Quick FX Overview Quick FX Overview Reviewed by Marc Chandler on September 17, 2010 Rating: 5
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SNB Steady CHF Hit

September 16, 2010
The Swiss franc is getting crushed. The SNB kept its three-month LIBOR target at 25 bp. It revised up this year's growth forecast to 2.5% from 2.0%. The government's forecast is a bit higher at 2.7%. The inflation forecast was cut to 0.7% from 0.9%, but even more telling was next year's inflation forecast was cut to 0.3% from 1.0%. In…
SNB Steady CHF Hit SNB Steady CHF Hit Reviewed by Marc Chandler on September 16, 2010 Rating: 5
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Fcous on Yen, Euro, Sterling and Swiss Franc

September 16, 2010
It does not appear that yesterday’s intervention has been followed with more action today. Some market observers will be suspicious for a bit every time a Japanese bank buys dollars. There was no doubt about yesterday’s operation and it was quickly confirmed by officials. Strong domestic pressure was brought to bear on officials for the interventi…
Fcous on Yen, Euro, Sterling and Swiss Franc Fcous on Yen, Euro, Sterling and Swiss Franc Reviewed by Marc Chandler on September 16, 2010 Rating: 5
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Quick FX Snapshot

September 16, 2010
The US dollar is trading broadly mixed against the major foreign currencies. It is consolidating yesterday’s intervention-inspired losses against the Japanese yen. There was no clear sign of intervention today and the greenback has been confined to around a quarter yen range on either side of JPY85.50. The euro is extending its recent gains, with …
Quick FX Snapshot Quick FX Snapshot Reviewed by Marc Chandler on September 16, 2010 Rating: 5
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US Industrial Production Hints At Soft Patch Easing

September 15, 2010
The 0.2% rise in US industrial output was in line with market expectations and there did not seem to be much of a market reaction. Nevertheless, the report is yet another piece of news that suggest that the soft(er) patch the US hit in Q2 is slowing easing. May-July series were revised lower, but that still seems consistent with the soft patch eas…
US Industrial Production Hints At Soft Patch Easing US Industrial Production Hints At Soft Patch Easing Reviewed by Marc Chandler on September 15, 2010 Rating: 5
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What You Need to Know about BOJ Intervention

September 15, 2010
The main development has been Japanese intervention; the first such operation in six years. Although there has been much speculation of the likelihood of intervention, hinted at by stepped up verbal warnings by officials, but following the defeat of Ozawa in his leadership challenge, the immediate threat of intervention appeared to slacken and man…
What You Need to Know about BOJ Intervention What You Need to Know about BOJ Intervention Reviewed by Marc Chandler on September 15, 2010 Rating: 5
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FX Update

September 15, 2010
The US dollar is firmer against the major foreign currencies, but the main interest today is on the first Japanese intervention in six years that has succeeded in driving the greenback through the JPY85.00. This appears to have weighed on the Swiss franc as well, which also is among the weakest performers today.
For its part, the euro has been con…
FX Update FX Update Reviewed by Marc Chandler on September 15, 2010 Rating: 5
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Dollar Slumps

September 14, 2010
Stronger than expected US retail sales and business inventories fanned the risk appetites. Speculation that the SNB could raise rates this week and new attention on a WSJ story reporting that a US investment house expected the Fed to step up their bond purchases in November has pushed the foreign currencies higher. We have played down this possibi…
Dollar Slumps Dollar Slumps Reviewed by Marc Chandler on September 14, 2010 Rating: 5
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Japan to Help California ?

September 14, 2010
Japan finds itself in a bind. Although Japanese portfolio capital outflows have been strong in recent weeks, they have not been sufficient to offset the purchases of yen. Japan needs the yen to be sold. On the other hand, some US states need funds. One way to square the circle emerged late yesterday. The Japan Bank for International Cooperation of…
Japan to Help California ? Japan to Help California ? Reviewed by Marc Chandler on September 14, 2010 Rating: 5
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Key Drivers on Tuesday

September 14, 2010
There are three key developments today:

First, Japan’s Prime Minister Kan won the DPJ party leadership contest against Ozawa. Ozawa had been a advocating material intervention and new fiscal stimulus. His defeat reduces those risks and has been a factor helping lift the yen today. The rating agencies quickly responded. S&P indicated it would ma…
Key Drivers on Tuesday Key Drivers on Tuesday Reviewed by Marc Chandler on September 14, 2010 Rating: 5
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Dollar Mostly Firmer

September 14, 2010
The US dollar is mostly higher as a result of disappointing German, UK and New Zealand economic data. However, Prime Minister Kan succeeded in holding off the challenge at the DPJ leadership contest, easing the threat on the margins of intervention, which helped lift the yen to new 15-year highs against the dollar. Like the yen, the Swiss franc al…
Dollar Mostly Firmer Dollar Mostly Firmer Reviewed by Marc Chandler on September 14, 2010 Rating: 5
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Major Foreign Currencies Firm, Last Week's Highs Beckon

September 13, 2010
The combination of news (US, China and Basel) have reduced concerns about global growth and the risk of a double dip. This has seen risk appetites increase further at the start of the week. The major foreign currencies have trended higher through the North American morning and are poised to challenge last week's highs. The euro faces initial r…
Major Foreign Currencies Firm, Last Week's Highs Beckon Major Foreign Currencies Firm, Last Week's Highs Beckon Reviewed by Marc Chandler on September 13, 2010 Rating: 5
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Preview: August US Retail Sales Data on Tuesday

September 13, 2010
The US will report August retail sales data tomorrow. The consensus is for a 0.3% rise on both the headline and excluding autos. We already know that auto sales were soft and ICSC chain store sales were ok (3.2% vs 2.8% year-over-year). However, a consensus number will likely be seen as further confirmation that that exceptionally soft patch the e…
Preview: August US Retail Sales Data on Tuesday Preview: August US Retail Sales Data on Tuesday Reviewed by Marc Chandler on September 13, 2010 Rating: 5
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Brazil Extends Rally

September 13, 2010
The Brazilian real is off to a firm start, promising to extend its rally for the fifth consecutive week--something that it has been unable to do in the past five months. There are four drivers and they may, taken together, rise the ire of officials who want to prevent further deterioration of the current account position. In July, Brazil's 12-…
Brazil Extends Rally Brazil Extends Rally Reviewed by Marc Chandler on September 13, 2010 Rating: 5
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Growth Story and Basel Drive Markets

September 13, 2010
One of the most important developments over the past two weeks has been the easing of the summer’s anxiety about the pace global growth.
The important US economic reports include the August manufacturing ISM and the better than expected jobs data (and back month upward revisionsin private sector job creation). To this list, we can add the pre-week…
Growth Story and Basel Drive Markets Growth Story and Basel Drive Markets Reviewed by Marc Chandler on September 13, 2010 Rating: 5
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Dollar Down, Equities Up

September 13, 2010
The US dollar is broadly lower to start the new week as the markets respond positively to the somewhat stronger than expected Chinese data reported over the weekend and the Basel III proposals which allow an eight year implementation period.
Contrary to pre-weekend speculation there was no Chinese rate hike or intervention by Japan. The euro’s adv…
Dollar Down, Equities Up Dollar Down, Equities Up Reviewed by Marc Chandler on September 13, 2010 Rating: 5
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Insight into Next Week's TIC Data and Japanese Activity

September 10, 2010
The US Treasury will report the July TIC data at the end of next week. Japan's July capital account figures may shed some light on what to expect. These figures show that Japanese investors bought JPY3.6 trillion (~$42.8 bln) of US Treasuries.
Admittedly the Japanese data is not directly comparable with the TIC data which is derived from trans…
Insight into Next Week's TIC Data and Japanese Activity Insight into Next Week's TIC Data and Japanese Activity Reviewed by Marc Chandler on September 10, 2010 Rating: 5
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The Yen Conundrum

September 10, 2010
Seventy years ago next month, Winston Churchill described Soviet foreign policy as a “riddle wrapped in a mystery inside an enigma”. That now may be apropos of the Japanese yen.
Japan is a country that appears to be literally in decline. The population has begun shrinking, as has the work force. It has been almost 21 years since the Japanese stock…
The Yen Conundrum The Yen Conundrum Reviewed by Marc Chandler on September 10, 2010 Rating: 5
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China, Yen, Sweden Observations, US-German Rate Update

September 10, 2010
China is the main talking point today. In an unusual move China brought forward by a couple of days the release of its CPI and industrial production figures from September 13 to tomorrow September 11. The shift to a weekend release is even more unusual and it has set the chins wagging.
There is speculation the data will be strong, especially the C…
China, Yen, Sweden Observations, US-German Rate Update China, Yen, Sweden Observations, US-German Rate Update Reviewed by Marc Chandler on September 10, 2010 Rating: 5
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Dollar Soft, Yuan Rallies

September 10, 2010
The US dollar is firm against the safe-haven yen and Swiss franc but is winding down the week on a softer note against the euro, sterling and the dollar-bloc currencies. Most emerging market currencies are firmer too in an environment in which investor anxiety levels appear to have eased. After initially slipping in Asia to new lows here in Septem…
Dollar Soft, Yuan Rallies Dollar Soft, Yuan Rallies Reviewed by Marc Chandler on September 10, 2010 Rating: 5
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Dovish Brazil, but Firm Real

September 09, 2010
The market is talking about the dovish cast to the minutes of the recent central bank meeting. It seems to be among the strongest signals to date that policy is on hold. The market had already pushed out expectations for a hike into next year and now are scaling even those back a bit.
The dovishness of the minutes has ben further driven home by th…
Dovish Brazil, but Firm Real Dovish Brazil, but Firm Real Reviewed by Marc Chandler on September 09, 2010 Rating: 5
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Norway and Peripheral Bond Markets

September 09, 2010
Norway's government pension funds is the second largest sovereign wealth funds in the world with around $450 bln under management. Abu Dhabi is thought to have the largest sovereign wealth fund. The finance minister indicated that it has bought peripheral European bonds (Spain, Greece, Italy and Portugal. Ireland was note cited). Although many…
Norway and Peripheral Bond Markets Norway and Peripheral Bond Markets Reviewed by Marc Chandler on September 09, 2010 Rating: 5
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BOE, Japan, Australia, South Korea and India Featured

September 09, 2010
The Bank of England kept rates on hold as widely expected. While there has been much discussion, if not consternation, over the possibility of QEII in the US, many observers have missed the creeping talk, in part encouraged by BOE Governor King, of another round of asset purchases by the BOE. Similar to the Fed, if it does transpire, most are not …
BOE, Japan, Australia, South Korea and India Featured BOE, Japan, Australia, South Korea and India Featured Reviewed by Marc Chandler on September 09, 2010 Rating: 5
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Consoldiative Tone in FX, Equities Firmer

September 09, 2010
The US dollar is mixed today as it consolidates against the euro and Swiss franc, remains heavy against the yen and is performing best against sterling, especially following the unexpected marked deterioration of the trade balance. Euro buying against sterling and a healthy reception to the Irish bill auction helped the euro recover from the test …
Consoldiative Tone in FX, Equities Firmer Consoldiative Tone in FX, Equities Firmer Reviewed by Marc Chandler on September 09, 2010 Rating: 5
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European Central Banks may be Stepping Up Bond Purchases

September 08, 2010
With peripheral European bond spreads under pressure, it is not surprising to hear more talk of purchases by European central banks. What is slightly different about the talk today is that:
1) The purchases are said to involve at least three peripheral countries, Portugal, Greece, and Ireland, usually the talk has focused on 1-2 countries.
European Central Banks may be Stepping Up Bond Purchases European Central Banks may be Stepping Up Bond Purchases Reviewed by Marc Chandler on September 08, 2010 Rating: 5
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German Shine Dulls, BOC Meeting, Japanese Flows

September 08, 2010
European policy makers have successfully addressed the spring’s liquidity crisis. Portugal managed to hold a decent bond auction today even as the premium over Germany widened to new record levels. The underlying solvency issue—or more precisely—the need to restructure the sovereign debt—has not been addressed. This leaves Europe particularly sen…
German Shine Dulls, BOC Meeting, Japanese Flows German Shine Dulls, BOC Meeting, Japanese Flows Reviewed by Marc Chandler on September 08, 2010 Rating: 5
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Dollar Slips

September 08, 2010
The US dollar is mostly lower today, with sterling leading the way. Corporate acquisitions, or talk of them at any rate, with the help of the second consecutive rise in the Halifax home price index, and as expected manufacturing data (+0.3% in July) helped sterling bounce 2 cents off yesterday’s low to test $1.55 today before running into offers. …
Dollar Slips Dollar Slips Reviewed by Marc Chandler on September 08, 2010 Rating: 5
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European Woes Continue

September 07, 2010
Coming back from the Labor Day holiday, US investors have been caught a bit off guard by the reversal of sentiment toward Europe. The euro had rallied in the immediate aftermath of the stronger than expected US jobs data ostensibly on a greater appetite for risk. There was some follow through early yesterday and then only lower.
European Woes Continue European Woes Continue Reviewed by Marc Chandler on September 07, 2010 Rating: 5
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The Dollar's State of Play

September 07, 2010
At the start of the summer, the two legs that had supported the dollar had given way. The European financial crisis eased and the US economic momentum flagged. The summer months saw these developments extend.
European countries on the periphery have not been frozen out of the capital markets. They have sold their bonds (in Greece’s case, bills) at…
The Dollar's State of Play The Dollar's State of Play Reviewed by Marc Chandler on September 07, 2010 Rating: 5
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Market's Focus Shifts From US Economy Back to Europe

September 07, 2010
It as if market participants can focus only on one of the key drivers of financial markets at a time. From last November through May, European financial woes were paramount. As the EU and ECB innovated and, we have argued bluffed (through exaggerating the size of the financial program in mid-May) the liquidity pressure eased and fears of the immin…
Market's Focus Shifts From US Economy Back to Europe Market's Focus Shifts From US Economy Back to Europe Reviewed by Marc Chandler on September 07, 2010 Rating: 5
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Euro Slides, risk Aversion Rises

September 07, 2010
The US dollar is broadly higher against most major and emerging market currencies today, with the yen and Swiss franc being the notable exceptions. With last week’s US employment data taking the immediate focus off the US and the potential for QEII, the market has been able give full attention to the negative European developments, which include n…
Euro Slides, risk Aversion Rises Euro Slides, risk Aversion Rises Reviewed by Marc Chandler on September 07, 2010 Rating: 5
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CNBC: Markets Roundup CNBC: Markets Roundup Reviewed by magonomics on September 03, 2010 Rating: 5
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This is BoJ Intervention Window (if it really wanted it)

September 03, 2010
The market has been rightly skeptical of the efficacy of possible BOJ intervention. Part of the argument is that it would be fighting the tide and market forces. However, the better than expected US employment data has spurred a sharp drop in the yen. If Japanese officials really wanted to intervene, this would be the proverbial golden opportunity…
This is BoJ Intervention Window (if it really wanted it) This is BoJ Intervention Window (if it really wanted it) Reviewed by Marc Chandler on September 03, 2010 Rating: 5
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Better than Expected Jobs Data--Dollar Slips

September 03, 2010
The employment data was better than expected, but the dollar is not making much headway. The private sector added 62k and the July data was revised up to 107k from 71k initially. The unemployment rate ticked up to 9.6% from 9.5%.
Better than Expected Jobs Data--Dollar Slips Better than Expected Jobs Data--Dollar Slips Reviewed by Marc Chandler on September 03, 2010 Rating: 5
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Jobs DAta is Often Anti-Climactic

September 03, 2010
The main focus today is on the US employment report. The fact that the service sector ISM is released shortly afterwards and that, given the Monday holiday in the US, and some markets will close early and could impact the market’s reaction to the jobs data itself. Yet, while the jobs report is regarded as among the most important economic releases…
Jobs DAta is Often Anti-Climactic Jobs DAta is Often Anti-Climactic Reviewed by Marc Chandler on September 03, 2010 Rating: 5
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Ahead of the Jobs Data

September 03, 2010
The US dollar is mixed in quiet trading ahead of the US jobs report. With some risk-taking is returning to the markets on the back of data this week suggesting that the pace of the slowdown may be moderating and this is lending support to the euro and sterling and weighing on the yen and Swiss franc. The general consolidative tone that emerged nea…
Ahead of the Jobs Data Ahead of the Jobs Data Reviewed by Marc Chandler on September 03, 2010 Rating: 5
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More on Potential Intervention

September 02, 2010
Many had expected the BOJ to have intervened already and its absence raises the question of why haven't they. The simplest explanation is they don't think it would be effective. This is the meaning of the official comments that say that the real issue is dollar weakness not yen strength. But some do not find the straight forward explanatio…
More on Potential Intervention More on Potential Intervention Reviewed by Marc Chandler on September 02, 2010 Rating: 5
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Little News from US Jobs and Trichet

September 02, 2010
The two key events of the day are passing with little fanfare. The weekly initial jobless claims in the US slipped and sufficiently so as to bring down the 4-week moving average for the first time in a little over a month, but remain too close to 500k to ease anxiety very much.
The ECB left rate on hold, revised up both growth forecasts a notch an…
Little News from US Jobs and Trichet Little News from US Jobs and Trichet Reviewed by Marc Chandler on September 02, 2010 Rating: 5
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Waiting for US Jobs and Trichet

September 02, 2010
There are two sources of event risk. The first, and lesser of the two, is the US weekly initial jobless claims. The modest pullback from the above 500k reading in mid-August was a constructive development, but the 4-week moving average still ticked up to its highest level of the year (486k). It will take a weekly reading today below 482k to bring …
Waiting for US Jobs and Trichet Waiting for US Jobs and Trichet Reviewed by Marc Chandler on September 02, 2010 Rating: 5
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Capital Markets Wednesday

September 02, 2010
The US dollar is mostly softer, though within yesterday’s ranges as market participants await the ECB’s press conference and US economic data. Sterling is under-performing perhaps being impacted by the softer string of recent data, including today’s construction PMI (52.1 vs 53.2 consensus and July’s 54.1) and the fifth consecutive monthly decline…
Capital Markets Wednesday Capital Markets Wednesday Reviewed by Marc Chandler on September 02, 2010 Rating: 5
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Canada and Mexico Benefit from Stronger ISM

September 01, 2010
The Canadian dollar and Mexican peso have benefitted from the better than expected US ISM and the risk-on environment. The strong gains in the Canadian dollar come even though as we noted yesterday, a BOC rate hike at the Sept 8th meeting, which previously was fully discounted, seems less likely given the string of disappointing Canadian data, dou…
Canada and Mexico Benefit from Stronger ISM Canada and Mexico Benefit from Stronger ISM Reviewed by Marc Chandler on September 01, 2010 Rating: 5
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US Foreign Securities

September 01, 2010
The US Treasury published its annual report yesterday on US holdings of foreign securities. It is a preliminary report and the final one is expected in late October.
The basic conclusion was that at the end of last year, Americans owned roughly $6 trillion of foreign equity and debt instruments. Unlike most foreign investors, when Americans invest …
US Foreign Securities US Foreign Securities Reviewed by Marc Chandler on September 01, 2010 Rating: 5
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Will the Risk Appetite Continue Through the North American Session?

September 01, 2010
Given the slump in equity markets in August and the heightened concern of a global economic slowdown, there seems to be a collective sigh of relief, not just that the month is over, but that the economies, generally speaking, may not have performed so badly. Australia got the ball rolling with a stronger than expected Q2 GDP. Exports rose 5.6% in …
Will the Risk Appetite Continue Through the North American Session? Will the Risk Appetite Continue Through the North American Session? Reviewed by Marc Chandler on September 01, 2010 Rating: 5
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Growth In Australia and China Lifts Sentiment

September 01, 2010
The US dollar is broadly lower to start September as stronger data, especially from Australia and China encourage new risk taking. Yet this has not seen the yen and Swiss franc, beneficiaries of risk aversion, lose ground against the greenback, though they are under-performing on the crosses. This, coupled with the fact that some countries like th…
Growth In Australia and China Lifts Sentiment Growth In Australia and China Lifts Sentiment Reviewed by Marc Chandler on September 01, 2010 Rating: 5
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