Daily currency update courtesy of Halo financial

(Catharine Higginson) #1

The wait is finally over. The Japanese Ministry of Finance (MOF) this morning intervened in the FX markets at 83.00 for the first time in 6 ½ years. The warnings from Japanese officials have been coming thick and fast after USDJPY hit a 15-year high but the selling of 300bn Yen wasn’t generally expected above 80.00 Yen. The MOF have stated they are not targeting a particular rate however another official has mentioned 82.00 as the line in the sand. According to the MOF intervention is not yet finished, so beware!

September Australian Westpac consumer confidence surprised to the downside coming out at -5.0% compared with +5.4% in August. It looks like August confidence was overstated; therefore the net effect is that confidence is still reasonably flat.

The war of words is hotting up between Beijing and Washington over Chinese currency manipulation. Some on Capitol Hill want to impose trade sanctions in retaliation to the Chinese holding the Yuan at artificially low levels. Chinese officials have warned the US they will be the losers in a trade war as they will sell some of their US$2.45tn holdings of US treasuries. The reality is that the Chinese buy trillions of US and Japanese treasury bonds because it weakens the Yuan against the dollar and Yen. Selling US treasuries would suit US exporters nicely. Secondly by selling a portion of their holdings of US treasuries they will significantly devalue their remaining holdings of treasuries.

The US dollar was sold heavily yesterday after Goldman Sachs chief economist the US Federal Reserve is likely to buy US$1.0tn treasuries in October or November to kick-start the US economy. At least three Fed members however will oppose Fed Chairman Bernanke’s attempt to stimulate through further asset purchases.

Bank of England Governor Mervyn King will not be looking forward to tonight’s speech to the TUC Union in Manchester. Union hardliner Bob Crow said he will boycott the speech as it was “like Christians asking the devil to address them”. The truth is he is off to see Toy Story 3. He just loves that cowboy Woody.

Three important US manufacturing figures are released this afternoon and will likely dictate this afternoon’s direction.

This evening the Reserve Bank of New Zealand will announce whether they keep interest rates on hold at 3.00% as we believe, or hike rates to 3.25% despite the Christchurch earthquake and collapse of South Canterbury Finance.

Today is Battle of Britain Day and marks the unveiling of a statute in Waterloo Place to the man the Germans nick-named “the Defender of London” New Zealander Air Chief Marshal Sir Keith Park.