News
Feb 8, 2012
ZIONSFX - NEWS
MARKET NEWS
FOREIGN EXCHANGE
After meeting with the so-called Troika—EC, ECB, and IMF—to iron out details of the EUR 13
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Feb 8, 2012
ZIONSFX - NEWS
MARKET NEWS
FOREIGN EXCHANGE
After meeting with the so-called Troika—EC, ECB, and IMF—to iron out details of the EUR 130 Bln bailout, Greek PM Papademos is now set to meet with a far more contentious group—the Small Troika—leaders of the 3 main opposition parties in Greece. Markets and traders are pinning hopes on this meeting, which has been deferred for weeks, and was delayed even today, as the next, final solution to the Greek debt problem. Even before this bailout has been agreed and delivered, there is market talk that Portugal is lining up to ask for the same deal. One cynic (read old FX trader) asked “are they looking for the same assistance, or just another prolonged on again/off again debate?”.
EURO rallied to 2-month highs just under $1.3300 this morning on this latest round of hope-springs-eternal. Having breached technical resistance at $1.3240, Euro is now poised to test $1.3335 then $1.3435. German Trade Data continue to point out the hollow nature of the Euro’s rally—a stable trade surplus of EUR 13 Bln masks the fact that German exports plunged 4.3%, while imports were off 3.9%.
The CANADIAN DOLLAR rallied to 0.9930 this morning, pushed by a strong Housing report. Canadian Housing Starts slipped 1.0% in January to 197.9k, beating forecasts of a drop to 194k. The C$ has broken the 200-day moving average at 0.9968, and is now headed major resistance at 0.9880. Charts also provide another bullish signal, with the 50- day crossing over the 100-day moving average. Momentum indicators suggest that the C$ will need to consolidate, even pull back a bit if this rally is to have any legs.
The JAPANESE YEN held steady at 76.85 today, despite data disappointment. Japan’s Current Account—the broadest measure of inflows and outflows in a currency and economy—plunged 44% to JPY 9.6 Trillion, the lowest in 15 years. The decline reflects not only a slowdown in trade and exports, but also a reduction in foreign investment income, another source of capital and Yen strength. Today’s data perhaps signal a structural shift in the Japanese economy is already well under way, and could foreshadow a renewed and extended weakening of the Yen.
FIXED INCOME
The latest story in the Wall Street Journal of a Greek PSI agreement notwithstanding, it seems that the ECB will delay releasing “final details” of this week’s discussions until next week. Early in the session, US Treasuries had dipped to 2-week lows, pushing yield on the 10-year above 2.0% for the first time since Jan 25th on a pending announcement. The aforementioned delay say safe haven buyers slinking back to buy US debt, pushing yield down to 1.975%, flat versus the close.
Yesterday’s 3-year note auction was an underwhelming success, with a bid-to-cover of 3.30 (versus the 3.35 average) and with indirect bidders (read as Central Banks) taking only 28% of the offering, the lowest in a year, versus the 37% average seen in the last 10-auctions. Further highlighting weak investor demand, primary dealers bought more of this auction than at any time in the past 3-years.Treasury will sell $24 Bln of 10-year notes later today, and $16 Bln of 30-year bonds tomorrow.
Bond traders have noted an interesting anomaly arising from the Fed’s asset purchase program (QE)—a 25%+, or approximately $5.5 Bln, drop in bids by dealers for Treasury’s longest maturity debt. This suggests to most analysts that the Fed is crowding out many investors and dealers, as well as pension funds and insurance companies, which need long-bonds for portfolio management. This could create a backlog of demand for the long dated securities, triggering another round of rising prices, falling yields in the long bond.
Bernanke’s focus at yesterday’s Senate testimony was on the efforts undertaken so far by American banks to reduce their exposure to Europe, and the budget deficit. He sees much improvement in the former, and much still needing to be accomplished in the latter. He is particularly concerned that Congress will substitute short-term deficit reduction, which could easily strangle the US economic recovery, for long-term structural reforms and reductions, which will go a long way towards reducing long-term interest rates for both the US Govt, and her people. Bernanke cautioned that the debt was a long time in the making, and the solution should have an equally long time frame, in order to be viable.
ECONOMICS NEWS
There are no noteworthy economic events due out today.
HEADLINE NEWS
The U.S. and E.U. sanctions on Iran are really starting to bite and are putting increasing pressure on the leadership while increasing the hardship for its population. Iran’s total grain production has been falling with 2011/2012 production forecast at 18.7 mln tons down from 20.7 mln a year earlier. Likewise wheat production in Iran is forecast at 13.8 mln tons down from 15.5 mln tons the year before. Corn exports from Ukraine to Iran have dropped by 40% in January primarily due to problems collecting payments as a result of the sanctions. Iran has defaulted on payments for approximately 200,000 tons of rice from India leading India’s Rice Exporters Association to warn members to stop rice exports based on credit. Similarly Malaysian palm oil exporters are cutting back on supplying. Meanwhile China is exploring for new suppliers for oil as it looks to Saudi Arabia to replace a fall in its imports from Iran. China is Iran’s top oil export market taking about 20% of Iranian exports. China has cut its purchases by around 285,000 bpd since January. Some believe that China’s increased purchases from Saudi Arabia are a gaming strategy to bargain for better prices which would offset the premium it’s paying for Saudi oil. The sanctions along with a falling rial are hurting the population by fueling inflation.
HSBC’s London based shipping division said ship prices fell as much as 20% as the Baltic Dry index hit 651 on Feb 2nd a level not seen since 1986. After the bubble in shipping rates during 2007 and 2008 there is a glut of ships coming on the market depressing prices and putting pressure on Chinese and Korean ship builders and financers. Small ship builders are most at risk and according to the China Assoc. of National Shipbuilding Industry more than 30% of the country’s small ship yards are expected to go bankrupt. A slowdown in China’s residential construction, auto sales and ship builders may offset increased production in the U.S. leading to headwinds for steel producers as low demand and higher costs erode profits.
Scott Stone, VP, Foreign Exchange Services | 801-844-7065 | Scott.Stone@zionsbank.com
Mark Garfield, SVP, International Banking | 801-844-7688 | Mark.Garfield@zionsbank.com
Gary DeGrange, VP, International Banking | 208-395-2285 | Gary.Degrange@zionsbank.com
The material presented in this email is for informational purposes only and should not be used or construed as a recommendation to buy or sell any financial instrument or currency or to participate in any particular trading strategy in any jurisdiction. While the information contained herein has been derived from sources believed to be accurate and reliable, we make no representation as to its accuracy or adequacy. The views and outlook presented are current as of the date of this communication and represent the views of the author and not those of Zions Bank. Such views are subject to change at any time based on market or other conditions. Zions Bank has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast of estimate set forth herein, changes or subsequently become inaccurate. Foreign exchange and money market information provided by Amegy Bank N.A., a subsidiary of Zions Bancorporation.
Zions Bank | 1 South Main Street | Salt Lake City, UT 84101
To stop receiving this update, please respond to sender with message “unsubscribe”
© 2012 Zions Bank |Member FDIC | Equal Housing Lender 
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Feb 7, 2012
ZIONSFX - NEWS
MARKET NEWS
FOREIGN EXCHANGE
A for effort, F (so far) for results—the EU continues to hold meetings about the intractable Gre
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Feb 7, 2012
ZIONSFX - NEWS
MARKET NEWS
FOREIGN EXCHANGE
A for effort, F (so far) for results—the EU continues to hold meetings about the intractable Greek debt problem, but has so far failed to meet expectations. Surprisingly, FX traders keep giving EU commissioners and the Euro a pass, leaving it mired in a tight $1.30-$1.32 range for the past 10 days. So, let’s talk about Asia for a change…
The AUSTRALIAN DOLLAR surged 1-cent to a 6-month high $1.0825 after the Reserve Bank of Australia left interest rate unchanged; most had expected RBA to follow with another 25-bp rate cut, in part on a slight dip in inflation, in part to soften the recent, very slight slowdown in China, one of Australia’s largest export markets. RBA will now likely hold steady unless external events trigger the need for additional stimulus. Look for the A$ to rise to $1.0880, then the recent high of $1.1080, then new historical highs projected at $1.1235, then $1.1670. Major support lies at $1.0640, then $1.0530.
The JAPANESE YEN fell to a 1-week low 76.85 today, after Ministry of Finance records showed the Min Fin had intervened in markets back in November, selling more than JPY 1 Trillion ($13.2 Bln). BoJ entered the market on Halloween, selling Yen to pull the Yen back from a record high 75.64, reached that previous Friday. The Yen plunged 4-Yen (more than 5%) on that day, but despite the massive effort, has since recovered to within ½-Yen of that high. Today’s news was a much warning as affirmation of public records, as BoJ & Fin Min fear another resurgence in the rampant Yen, which continues to negatively impact trade and feed deflation, both major impediments to Japan’s recovery.
One analyst, noting RBA’s cautionary hold today, said that Australians, and most other Pac-Rim countries—heavily dependent on Chinese demand—had best pay heed to signs of a pending economic slow-down in China: other than the New Year-holiday dip, YUAN has remained very steady in a 6.32-6.30 range since the first of OUR new year. PBoC could be dampening pressure to take the Yuan higher, to protect industries and exports; local prices for commercial metals—steel, copper, nickel—are lagging global prices, suggesting weaker domestic demand; stock markets in the world’s “hottest” economy are flat so far this year, while most European & American markets are higher, with even Korean and Japanese posting gains this year.
On a side note, the Federal Reserve reported that FX trading volumes continued to recover, a solid sign of renewed global growth. Trade in the US topped $975 Bln a day in October, 2011, a 20%+ increase over year-ago levels. London remains the world’s leading FX centre—despite a 3% decline, daily turn-over was a massive $1.97 Trillion. By way of comparison, NYSE Dollar volumes are on the order of 10-time smaller than the New York Fed’s FX data.
FIXED INCOME
US Treasury prices slipped lower today ahead of Treasury’s auction of $32 Bln of 3-year notes. Prices also continued to slip, yields rise amidst signs of renewed US growth. One analysts is forecasting an increase from the current 1.95% to 2.2% by the end of the first quarter, 2.55% by the end of the year, if data continue to surprise on the upside, the US Govt continues to auction and spend, and Greece (& EU) don’t melt into the sea.
In other news, Fed Chairman Ben Bernanke testifies today before the Combined House & Senate Budget Committees, the first official Fed appearance post-Payrolls. This is not the usual “Humphrey-Hawkins” testimony, the Fed’s regularly scheduled, bi-annual inquisition before each House. Rather, it is Congress’ chance for each member to get Mr. Bernanke to damn massive overspending, advocate Libertarian policies, and advocate for the poor—i.e., for each questioner to preach about her/his own ideas and programs. Of most interest will be Mr. Bernanke’s remarks, offered or solicited about last week’s sharp improvement in payrolls and Unemployment.
EQUITIES
The index of Asian markets rose to new 5-month highs today, despite declines in China, Japan, Hong Kong & Australia. Most consumer-export oriented markets were up on good US news. Chinese markets dropped 1.7% after a Ministry of Trade and Industry said that China faces economic uncertainty both at home and abroad (perhaps softening the path for Xi Jinping’s visit to the US next week).
US markets opened lower as traders awaited the latest in a long string of Greek rescue plans. a massive decline in German Industrial Production weighed on both European and US markets. This is a sign that even the German power-house in hot immune from the vagaries of the global economy. Warnings from the IMF, and even Chinese officials about China's own possible slowdown also worried investors.
Scott Stone, VP, Foreign Exchange Services | 801-844-7065 | Scott.Stone@zionsbank.com
Mark Garfield, SVP, International Banking | 801-844-7688 | Mark.Garfield@zionsbank.com
Gary DeGrange, VP, International Banking | 208-395-2285 | Gary.Degrange@zionsbank.com
The material presented in this email is for informational purposes only and should not be used or construed as a recommendation to buy or sell any financial instrument or currency or to participate in any particular trading strategy in any jurisdiction. While the information contained herein has been derived from sources believed to be accurate and reliable, we make no representation as to its accuracy or adequacy. The views and outlook presented are current as of the date of this communication and represent the views of the author and not those of Zions Bank. Such views are subject to change at any time based on market or other conditions. Zions Bank has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast of estimate set forth herein, changes or subsequently become inaccurate. Foreign exchange and money market information provided by Amegy Bank N.A., a subsidiary of Zions Bancorporation.
Zions Bank | 1 South Main Street | Salt Lake City, UT 84101
To stop receiving this update, please respond to sender with message “unsubscribe”
© 2012 Zions Bank |Member FDIC | Equal Housing Lender
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Feb 6, 2012
ZIONSFX - NEWS
MARKET NEWS
FOREIGN EXCHANGE
Markets remain focused on Greece, and its host of fiscal, financial and social problems. Today, we&rsq
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Feb 6, 2012
ZIONSFX - NEWS
MARKET NEWS
FOREIGN EXCHANGE
Markets remain focused on Greece, and its host of fiscal, financial and social problems. Today, we’ll see a different example of one-size-fits-none, when the Greek Govt—incarnating the will of the Greek people—resists calls for additional austerity. The EU & IMF have joined together to insist Greece cut wages by at least 25% (the actual cuts are closer to1/3rd, a draconian prescription which delays growth for years), in order to give Greece additional aid. At this point, investors seem willing to take the 65%-70% steep write-down, while the Greek populace and politicians are unwilling to accept 30-35% in wage cuts. So, while headlines continue to focus on official agreements and pronouncements, real chances for recovery still lie with the man and woman in streets of Greece.
EURO sagged from the start of trading, opening at $1.3110, then sliding to a session and 4-day low $1.3030 as Greeks continue to resist draconian austerity measures, as conditions for additional aid from its EU sisters, and the Big-Brother IMF. While the Greek Govt seems willing to cut expenses in principal with its aid partners, it is incapable of doing so in fact, particularly when those cuts virtually assure social unrest, and political ouster. Euro has dropped below $1.3066, its 14-day Moving Average, a minor technical bearish signal and is now poised to test $1.3005, significant technical support. A break opens the way to $1.2860, then $1.2620, the recent low.
Weak Retail Sales and an expected rate cut from the Reserve Bank of Australia weighed on the AUSTRALIAN DOLLAR today, sending it to $1.0675 and reversing all of Friday’s risk-on, US Employment report rally. Retail Sales dropped 0.1% (mkt +0.2%), the first decline in 6 months. The latter increases the chances of additional easing from the RBA; RBA was first major Central Bank to have begun raising rates in this cycle. However, the Australian economy continues to benefit from expectations that China will, at most, suffer a soft economic landing, while renewed economic growth in the US supports continued export. The A$ remains in an up-trend, with significant support at $1.0640. One analyst recommends his clients buy on any dips after tomorrow’s meeting of the RBA, calling for an eventual rally to $1.20. Major resistance lies at $1.1075 (July 2011 high) with minor resistance at $1.08.
The Mexican Peso tested the resistance level mentioned last week at 13.05 and was unable to break through it, making the Peso go the other way and breaking through the support levels mentioned last week of 12.91, 12.83 and eventually 12.75, which was the 200 day moving average. Even though Central Bank in Mexico did not make any mention if it would cut or raise rates, it should be noted that inflation is and will continue to hit Mexico, and a rate hike seems inevitable in the future. (Read, further appreciation for the Peso). The inflation will be boosted by the strong employment growth in the U.S. which will be reflected in more consumption for Mexican made products. It should also be noted that for the past three months there has been a slight correlation between the Euro and Peso, so expect the Peso to weaken along with the Euro on bad news out of the E.U. For the week, look for the Peso to trade sideways, with support at around the 12.50 level and a top-side resistance at 12.80 and possibly as high as 13.00 as part of some much needed consolidation. The 61.8% Fibonacci level from the lows of May and highs of November of last year lands at 12.56, if broken, the Peso will likely continue its way to 12
In general, Emerging Market and Export/Growth currencies (Mexican Peso, Korean Won, NZ$) weakened on the outlook for more conversation and agreement in principle, with reduced expectations for actual progress. Asian EM currencies are down ¼% to ½%, the C$ shed ¼-cent, & the Antipodeans ½-cent each. Major Latin currencies—the Peso and Real—were off ½% as well.
Traders and economists are looking ahead to this week’s short list of Central Bank meetings, including Australia’s RBA, the ECB and Bank of England, the former tomorrow, the latter two on Thursday. In addition, Central Banks in Korea, Indonesia and Poland also hold meetings on Thursday. None are expected to change rates, although the BoE might increase its quantitative easing (QE) program.
FIXED INCOME
After Friday’s data-driven decline, which sent prices down nearly 1-full point, and yields on the 10-year note up 10-bp to 1.925%, Treasuries are in a holding pattern today. Fitch Ratings today said that a “disorderly default [of Greek debt] cannot be wholly discounted”, reminding safe haven seeking investors why Treasuries remain the asset of choice. The Fed is expected to buy upwards of $2.0 Bln of 25- and 30-year bonds this week, another price positive for Treasuries. However, Treasury will auction $72 Bln of 3-, 10-, and 30-year debt this week, which is causing traders and dealers to lighten positions to take on the new auctions.
According to many familiar with the discussions, Greece is closer to defaulting on next month’s EUR 14 Bln of debt payments. Greek PM Papademos is struggling to win agreement on budget cuts, which include steep reductions in Greece’s high social costs (each Greek employee gets a 2 month’s “bonus”, not euphemistically called the 13th and 14th month’s pay). The insistence of the so-called Troika—EU, IMF and European Commission—on draconian austerity measures, almost assures Greece of a disorderly default, meaning no agreement and implementation ahead of the March 20th debt payment.
Despite this, analysts say that most markets continue to reflect a more sanguine investment mind-set. European bonds are generally higher, with yields down in both Core—German—and peripheral—everyone else—markets. Much of that confidence seems to arise from the ECB’s second Long Term Refinancing Operation. Traders said that banks are building up assets to present to the ECB as collateral for as much as EUR 1 Trillion of 1% funding for the next 3 years. the LTRO provides commercial banks virtually free money at a time when many are being boxed out of most other funding markets. ECB had earlier offered more than EUR 450 Bln of similar 3-year, ultra-cheap funding to banks in exchange for collateral (mortgages, bonds, EU-sovereign debt).
EQUITIES
Asian markets are poised to post one of the longest rallies since 2010, on the back of strong US employment and other economic data, which is taking up the slack from China, expected to slow. The IMF warned that Chinese growth could be cut in half, however, were the EU debt crisis to worsen, saying Chinese GDP would slip 4 percentage points in the event of a disorderly default. Japan’s Nikkei & Australia’s main Index each gained more than 1% on that news, most other markets were marginally higher.
European markets fell from 6-month highs as Greek politicians continue to wage war with each other, their constituents, and fellow EU officials over the very real need for real austerity. French banks were the big losers, dropping 3.5%+ or more on the risk of Greek default and the possibility of an even larger than 65% write-down.
US Futures were also lower in pre-market trade. Traders said that with a calendar short of economic news, EU headlines would dominate trading.
OTHER NEWS
Today is the unofficial beginning of Queen Elizabeth’s Diamond Anniversary, her 60th year of sitting the Throne of England. George VI died on this day in 1952. Elizabeth, then only 25 ascended the throne that day, but was not officially crowned until June 1952. Queen Victoria, Elizabeth’s Great-Great Grand-mother, is the only other monarch to sit the throne so long. In celebration, the British Banking industry will add a special bank holiday June 5th.
Scott Stone, VP, Foreign Exchange Services | 801-844-7065 | Scott.Stone@zionsbank.com
Mark Garfield, SVP, International Banking | 801-844-7688 | Mark.Garfield@zionsbank.com
Gary DeGrange, VP, International Banking | 208-395-2285 | Gary.Degrange@zionsbank.com
The material presented in this email is for informational purposes only and should not be used or construed as a recommendation to buy or sell any financial instrument or currency or to participate in any particular trading strategy in any jurisdiction. While the information contained herein has been derived from sources believed to be accurate and reliable, we make no representation as to its accuracy or adequacy. The views and outlook presented are current as of the date of this communication and represent the views of the author and not those of Zions Bank. Such views are subject to change at any time based on market or other conditions. Zions Bank has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast of estimate set forth herein, changes or subsequently become inaccurate. Foreign exchange and money market information provided by Amegy Bank N.A., a subsidiary of Zions Bancorporation.
Zions Bank | 1 South Main Street | Salt Lake City, UT 84101
To stop receiving this update, please respond to sender with message “unsubscribe”
© 2012 Zions Bank |Member FDIC | Equal Housing Lender
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Feb 3, 2012
ZIONSFX - NEWS
** Market News will be released in an abbreviated format today. The full Market Update will return Monday**
The dollar fell against the euro afte
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Feb 3, 2012
ZIONSFX - NEWS
** Market News will be released in an abbreviated format today. The full Market Update will return Monday**
The dollar fell against the euro after U.S. employers added more jobs than forecast in January, damping demand for the safety of the greenback. Nonfarm payrolls rose by 243,000, after increasing by 200,000 in December, the Labor Department reported today in Washington. The median of 89 economists in a Bloomberg Survey had forecast an addition of 140,000. The unemployment rate fell to 8.3 percent.
“A positive number will arouse demand for riskier assets and cause movement away from the dollar,” Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co., said before the release.
The dollar dropped 0.3 percent to $1.3178 per euro at 8:32 a.m. in New York. It rose 0.2 percent to 76.37 yen.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 78.977.
At a meeting last month, the Federal Reserve pledged to keep its interest rate near zero until late 2014. The accommodative policy tends to drive investors away from the dollar as they seek higher yields elsewhere.
Three Fed officials said rates should be increased in 2012, three said 2013, five said 2014, four said 2015 and two said 2016. Fed Chairman Ben S. Bernanke said yesterday the economy has shown signs of improvement while remaining vulnerable to shocks, and he called on lawmakers to reduce the long-term U.S. budget deficit.
“Fortunately, over the past few months, indicators of spending, production, and job-market activity have shown some signs of improvement,” Bernanke said in testimony to the House Budget Committee in Washington. “The outlook remains uncertain, however, and close monitoring of economic developments will remain necessary.”
Data this year have signaled the U.S. economy is recovering at a quickening pace. Manufacturing grew in January at the fastest pace in seven months, the Institute for Supply Management reported Feb. 1. Consumer confidence rose last month to the highest level in almost a year, according to a Thomson Reuters/University of Michigan index published Jan. 27.
The Dollar Index rose 0.4 percent on Jan. 6, when the Labor Department reported that payrolls increased by 200,000, more than the 155,000 forecast in a Bloomberg survey. The gauge advanced 0.5 percent on Dec. 2, when the unemployment rate unexpectedly dropped to 8.6 percent, the lowest level since 2009. It was later revised to 8.7 percent.
Scott Stone, VP, Foreign Exchange Services | 801-844-7065 | Scott.Stone@zionsbank.com
Mark Garfield, SVP, International Banking | 801-844-7688 | Mark.Garfield@zionsbank.com
Gary DeGrange, VP, International Banking | 208-395-2285 | Gary.Degrange@zionsbank.com
The material presented in this email is for informational purposes only and should not be used or construed as a recommendation to buy or sell any financial instrument or currency or to participate in any particular trading strategy in any jurisdiction. While the information contained herein has been derived from sources believed to be accurate and reliable, we make no representation as to its accuracy or adequacy. The views and outlook presented are current as of the date of this communication and represent the views of the author and not those of Zions Bank. Such views are subject to change at any time based on market or other conditions. Zions Bank has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast of estimate set forth herein, changes or subsequently become inaccurate. Foreign exchange and money market information provided by Amegy Bank N.A., a subsidiary of Zions Bancorporation.
Zions Bank | 1 South Main Street | Salt Lake City, UT 84101
To stop receiving this update, please respond to sender with message “unsubscribe”
© 2012 Zions Bank |Member FDIC | Equal Housing Lender
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Feb 2, 2012
ZIONSFX - NEWS
** Market News will be released in an abbreviated format today and tomorrow. The full Market Update will return Monday**
The euro weakened ver
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Feb 2, 2012
ZIONSFX - NEWS
** Market News will be released in an abbreviated format today and tomorrow. The full Market Update will return Monday**
The euro weakened versus the yen and the dollar as Greece struggled to reach an agreement with its bondholders on cutting the nation’s debt burden, adding to concern Europe’s fiscal crisis will deepen.
The common currency fell against 14 of its 16 most-traded counterparts as Luxembourg Prime Minister Jean-Claude Juncker said steps to tackle the debt crisis adopted at a summit on Jan.30 were “largely insufficient.” The yen rose to within 1 yen of a postwar high against the dollar, prompting speculation Japan will intervene to limit the currency’s gains. The dollar remained higher as claims for jobless benefits fell last week.
“The fact that it’s dragged on, people are taking that as meaning that there could be more problems than they initially thought,” David Mann, regional head of research for the Americas in New York at Standard Chartered Plc, said in reference to the Greek talks. “The first quarter is when people think that the crisis in Europe is going to be at the worst point, so the yen still has its safe-haven status.”
The euro weakened 0.5 percent to 99.81 yen at 9:10 a.m. in New York having dropped 1.8 percent over the past five trading days. The common currency fell 0.4 percent to $1.3114. The yen rose as high as 76.05 per dollar, approaching the postwar record of 75.35 set on Oct. 31, before trading up 0.1 percent at 76.10.
Greece and its creditors are locked in talks over a debt-swap deal for the nation. Bondholders last week lowered their demands for an average coupon on the new debt they would get after European officials demanded they take steeper losses. The European Central Bank is likely to refuse to show its hand on how it will help cut Greece’s debt burden until the deal is reached, said economists from ING Group to Deutsche Bank AG.
“We are skewed to the point where Europe would react more to negative news at this stage if it were to get any, and could drift on no news,” said Kit Juckes, head of foreign-exchange research at Societe Generale SA in London.
European Union leaders will need to take further steps when they convene again in early March, Juncker, who leads the group of euro-area finance ministers, said in a speech in Luxembourg today. He said he seeks better coordination of economic policy across the bloc and that Greek bond-swap talks with private creditors are “ultra difficult.”
The euro also declined as Spanish bonds fell after a debt sale. Spain auctioned 4.56 billion euros of debt due in 2015, 2016 and 2017, just surpassing its target of 4.5 billion euros($6 billion). That compares with a 6.61 billion-euro sale on Jan. 19, which was well above the target of 4.5 billion euros. The Spanish 10-year yield climbed 11 basis points to 4.90 percent.
The euro briefly erased losses after China’s Premier Wen Jiabao said his nation supports European efforts to stabilize the 17-nation currency. China is still researching the best way to participate in the European Financial Stability Facility, Wen said at a briefing with German Chancellor Angela Merkel in Beijing.
Japanese Finance Minister Jun Azumi said he “can’t overlook” speculative moves in the foreign-exchange market and is ready take “decisive” actions if necessary. The Japanese ministry sold the yen on Oct. 31 on concern its advance to a record will hurt earnings at exporters. Sharp Corp., Japan’s largest maker of LCD panels, yesterday forecast its worst annual loss since its founding a century ago, with its president saying exporting is “nearly impossible” with the strong yen.
“If the dollar-yen falls quickly then the Ministry of Finance might decide to intervene again,” said You-Na Park, a
foreign-exchange strategist at Commerzbank AG in Frankfurt. “Until then we will hear continued verbal intervention since the yen is quite strong.”
The yen has gained 6.1 percent over the past six months, the second-best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 6.2 percent, and the euro dropped 2.4 percent.
Applications for unemployment insurance payments in the U.S. dropped by 12,000 to 367,000 in the week ended Jan. 28, Labor Department figures showed today in Washington. The median forecast of 46 economists in a Bloomberg News survey projected 371,000. Companies are slowing the pace of firing as the world’s
largest economy picks up, a necessary step toward bigger gains in employment. Economists forecast a Labor Department report tomorrow may show employers boosted payrolls in January and the jobless rate held at an almost three-year low.
The dollar may weaken a further 1.5 percent against the yen after breaching a key trading level, Karen Jones, head of fixed-income, commodity and currency technical analysis at Commerzbank AG in London AG, said, citing trading patterns. “Dollar-yen has eroded the key Fibonacci retracement at 76.20,” she wrote in an e-mailed report. “This leaves the market on the defensive and refocuses attention back to the75.31 low and potentially psychological support at 75.”
The franc weakened against all except one of its 16 major counterparts amid talk of possible intervention by the Swiss National Bank. “The chatter is increasing whether the SNB will intervene before 1.20” per euro, said Elizabeth Gregory, a market strategist at Swissquote Bank SA in Geneva. “There’s still a lot of discussion about how the SNB defends the exchange-rate floor.” The franc was little changed at 1.20454 per euro and
dropped 0.4 percent to 91.89 centimes per dollar.
Scott Stone, VP, Foreign Exchange Services | 801-844-7065 | Scott.Stone@zionsbank.com
Mark Garfield, SVP, International Banking | 801-844-7688 | Mark.Garfield@zionsbank.com
Gary DeGrange, VP, International Banking | 208-395-2285 | Gary.Degrange@zionsbank.com
The material presented in this email is for informational purposes only and should not be used or construed as a recommendation to buy or sell any financial instrument or currency or to participate in any particular trading strategy in any jurisdiction. While the information contained herein has been derived from sources believed to be accurate and reliable, we make no representation as to its accuracy or adequacy. The views and outlook presented are current as of the date of this communication and represent the views of the author and not those of Zions Bank. Such views are subject to change at any time based on market or other conditions. Zions Bank has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast of estimate set forth herein, changes or subsequently become inaccurate. Foreign exchange and money market information provided by Amegy Bank N.A., a subsidiary of Zions Bancorporation.
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