Dmitry Shagardin
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Scotia Capital: loonie and Aussie under pressure for now
Canadian and Australian dollars have suffered from rising demand for safe-haven currencies, such as Japanese yen, Swiss franc and US dollar after Japan’s earthquake that broke out on March 11.
Currency strategists at Scotia Capital note that there are several factors influencing the loonie’s rate. The specialists underline that Canada’s dollar is a currency that performs well during periods of global growth and underperforming when global growth fades. As a result, the recent rise in risk aversion, a dampened outlook for global growth, a drop in commodity prices and a firming in the US dollar have pushed the pair USD/CAD above the 50‐day MA. The impact on Australian dollar will be stronger as Japan is Australia’s second largest trading partner.
However, in the longer Scotia Capital still expects that Canadian currency will reach 0.95 by the end of the year. Nomura Securities announced earlier that it was closing out its short Australian dollar positions.
BNY Mellon: investors will sell emerging market currencies
Currency strategists at BNY Mellon claim that it’s possible to observe the net outflow from higher yielding currencies such as the South African rand, Russian ruble, Hungarian forint, Brazilian real, Argentine peso and Turkish lira. Investors’ risk sentiment has deteriorated after the Japanese disaster. The market’s participants poured their money into Swiss francs, US dollars and even yen.
J.P. Morgan also turned bearish on emerging-market currencies cutting the currency exposure in its Global Bond Index-Emerging Markets portfolio by 10%, with especially large reductions in the Brazilian real, the Chilean peso, and the Russian ruble. According to the bank, there’s the risk that Japanese investors will sell emerging-market currency-related debt to buy yen.
Credit Suisse: BOJ should lower rates
Analysts at Credit Suisse claim that the Bank of Japan has to cut short-term interest rates in order to stop yen’s appreciation to the record maximums. In their view, this would be better than the government intervention in the currency market.
Japanese currency climbed yesterday to 76.31 yen versus US dollar rising above the previous post-World War II maximum at 79.75 yen per dollar reached in April 1995.
The specialists believe that the pair USD/JPY will stay in range between 78 and 79 yen unless the spread in short-term interest rates between Japan and the United States widens.
The central bank should lower the interest rate on a 30 trillion yen ($378 billion) credit program, as well as the interest on excess reserves held by financial intuitions at the BOJ.
On March 14 Japanese monetary authorities doubled the size of its asset-purchase plan to 10 trillion yen and kept the benchmark interest rate at 0-0.1%.
Mizuho: Japan, US and Europe may conduct joint intervention
Analysts at Mizuho Securities think that Japan, United States and Europe may conduct joint currency intervention.
The specialists say that if G7 nations agree that yen is showing excessive volatility and disorderly movements, then Japan, the US and Europe may join their efforts to sell yen for dollars and euro.
Japanese currency climbed yesterday to 76.31 yen versus US dollar rising above the previous post-World War II maximum at 79.75 yen per dollar reached in April 1995. After that the pair USD/JPY managed to recover to the 79 yen area on the expectations that Japanese monetary authorities will intervene to weaken the national currency.
Analysts on SNB rates
Analysts at BNP Paribas note that the markets wasn’t surprised by today’s decision of the Swiss National Bank to keep the benchmark interest rate at the current 0.25% level and increase growth and inflation forecasts as investors were looking forward to exactly the same outcome.
The specialists note that the SNB was very careful not sound too hawkish as Swiss franc is strengthening and there's high uncertainty about the scale and implications of the Japanese crisis.
Economists at UniCredit claim that the possibility of the rate hike has declined. In their view, Japanese earthquake and its impact on the ***ushima power plant introduced a “new element of risk”. UniCredit supposes that the SNB won’t start lifting up rates until September.
Specialists at Moody's also believe that SNB is likely to keep its key interest rate on hold for the next several months as the strong Swiss franc and the euro zone economic weakness will affect Swiss exports.
Strategists at Citigroup expect Switzerland’s monetary authorities to begin raising rates in the third quarter. The exact term depends on how the near-term uncertainties are resolved. The interest-rate bias seems upside as the SNB dropped previous references to the danger of deflation. On the contrary, its statement indicates concern that low interest rates are encouraging undesirably strong growth of credit and broad money.
Commerzbank: comments on USD/JPY
US dollar has compensated yesterday’s decline rising from the new record minimum at 76.60 above 79.00. Then, however, the pair USD/JPY once again headed down, this time at lower pace.
Technical analysts at Commerzbank note that resistance for US dollar is found at 79.78 and 80.60 levels representing 50% and 61.8% Fibonacci retracements of the rate’s decline during the past week.
According to the bank, bearish pressure on the greenback will ease only if it overcomes January minimums at 80.93.
BNP Paribas cut Japan's growth forecast
Analysts at BNP Paribas reduced their Japanese economic growth forecast for 2011 due to the 9.0 magnitude earthquake in northern Japan and the nuclear crisis at the ***ushima power plant.
The projections for the fiscal year growth were lowered from 1.6% to 0.9%, while the estimates for the calendar year were cut 1.6% to 1.2%.
The specialists expect the country’s economy to contract severely in the first two quarters of the year. In the third quarter Japan will likely return to the positive growth. In 2012 Japanese GDP may add 2.9% helped by the reconstruction.
These forecasts are based on assumption that the ***ushima crisis will be contained and the rolling blackouts by Tepco will finish as planned at the end of April.
Deutsche Bank: QE2 turned out to be efficient enough
Monetary stimulus measures conducted by the Federal Reserve have shown rather impressive results.
Since the Fed’s Chairman Ben S. Bernanke claimed on August 27 that it’s necessary to launch additional asset purchase program, the Standard & Poor’s 500 Index of stocks gained 18%. According to Bank of America Merrill Lynch index, the risk premium on high-yield, high-risk bonds decreased from 6.81% to 5.16%. Inflation expectations rose by 44.4%, while the unemployment rate has fallen to 8.9% in February, the lowest since April 2009.
Analysts at Deutsche Bank Securities approve the approach of US monetary authorities noting that the deflation risk has been successfully eliminated that helped the stock market rise.
The QE2 began on November 3 and is scheduled to last until the end of June. The Fed pledged to but $600 billion of Treasuries. The QE1 accounted for $1.7 trillion of asset purchases and finished in March 2010. The QE was criticized by the Republicans who feared the surge in prices. However, core inflation rose in January only by 0.2% in comparison with 2010 level.
Canadian and Australian dollars have suffered from rising demand for safe-haven currencies, such as Japanese yen, Swiss franc and US dollar after Japan’s earthquake that broke out on March 11.
Currency strategists at Scotia Capital note that there are several factors influencing the loonie’s rate. The specialists underline that Canada’s dollar is a currency that performs well during periods of global growth and underperforming when global growth fades. As a result, the recent rise in risk aversion, a dampened outlook for global growth, a drop in commodity prices and a firming in the US dollar have pushed the pair USD/CAD above the 50‐day MA. The impact on Australian dollar will be stronger as Japan is Australia’s second largest trading partner.
However, in the longer Scotia Capital still expects that Canadian currency will reach 0.95 by the end of the year. Nomura Securities announced earlier that it was closing out its short Australian dollar positions.
BNY Mellon: investors will sell emerging market currencies
Currency strategists at BNY Mellon claim that it’s possible to observe the net outflow from higher yielding currencies such as the South African rand, Russian ruble, Hungarian forint, Brazilian real, Argentine peso and Turkish lira. Investors’ risk sentiment has deteriorated after the Japanese disaster. The market’s participants poured their money into Swiss francs, US dollars and even yen.
J.P. Morgan also turned bearish on emerging-market currencies cutting the currency exposure in its Global Bond Index-Emerging Markets portfolio by 10%, with especially large reductions in the Brazilian real, the Chilean peso, and the Russian ruble. According to the bank, there’s the risk that Japanese investors will sell emerging-market currency-related debt to buy yen.
Credit Suisse: BOJ should lower rates
Analysts at Credit Suisse claim that the Bank of Japan has to cut short-term interest rates in order to stop yen’s appreciation to the record maximums. In their view, this would be better than the government intervention in the currency market.
Japanese currency climbed yesterday to 76.31 yen versus US dollar rising above the previous post-World War II maximum at 79.75 yen per dollar reached in April 1995.
The specialists believe that the pair USD/JPY will stay in range between 78 and 79 yen unless the spread in short-term interest rates between Japan and the United States widens.
The central bank should lower the interest rate on a 30 trillion yen ($378 billion) credit program, as well as the interest on excess reserves held by financial intuitions at the BOJ.
On March 14 Japanese monetary authorities doubled the size of its asset-purchase plan to 10 trillion yen and kept the benchmark interest rate at 0-0.1%.
Mizuho: Japan, US and Europe may conduct joint intervention
Analysts at Mizuho Securities think that Japan, United States and Europe may conduct joint currency intervention.
The specialists say that if G7 nations agree that yen is showing excessive volatility and disorderly movements, then Japan, the US and Europe may join their efforts to sell yen for dollars and euro.
Japanese currency climbed yesterday to 76.31 yen versus US dollar rising above the previous post-World War II maximum at 79.75 yen per dollar reached in April 1995. After that the pair USD/JPY managed to recover to the 79 yen area on the expectations that Japanese monetary authorities will intervene to weaken the national currency.
Analysts on SNB rates
Analysts at BNP Paribas note that the markets wasn’t surprised by today’s decision of the Swiss National Bank to keep the benchmark interest rate at the current 0.25% level and increase growth and inflation forecasts as investors were looking forward to exactly the same outcome.
The specialists note that the SNB was very careful not sound too hawkish as Swiss franc is strengthening and there's high uncertainty about the scale and implications of the Japanese crisis.
Economists at UniCredit claim that the possibility of the rate hike has declined. In their view, Japanese earthquake and its impact on the ***ushima power plant introduced a “new element of risk”. UniCredit supposes that the SNB won’t start lifting up rates until September.
Specialists at Moody's also believe that SNB is likely to keep its key interest rate on hold for the next several months as the strong Swiss franc and the euro zone economic weakness will affect Swiss exports.
Strategists at Citigroup expect Switzerland’s monetary authorities to begin raising rates in the third quarter. The exact term depends on how the near-term uncertainties are resolved. The interest-rate bias seems upside as the SNB dropped previous references to the danger of deflation. On the contrary, its statement indicates concern that low interest rates are encouraging undesirably strong growth of credit and broad money.
Commerzbank: comments on USD/JPY
US dollar has compensated yesterday’s decline rising from the new record minimum at 76.60 above 79.00. Then, however, the pair USD/JPY once again headed down, this time at lower pace.
Technical analysts at Commerzbank note that resistance for US dollar is found at 79.78 and 80.60 levels representing 50% and 61.8% Fibonacci retracements of the rate’s decline during the past week.
According to the bank, bearish pressure on the greenback will ease only if it overcomes January minimums at 80.93.
BNP Paribas cut Japan's growth forecast
Analysts at BNP Paribas reduced their Japanese economic growth forecast for 2011 due to the 9.0 magnitude earthquake in northern Japan and the nuclear crisis at the ***ushima power plant.
The projections for the fiscal year growth were lowered from 1.6% to 0.9%, while the estimates for the calendar year were cut 1.6% to 1.2%.
The specialists expect the country’s economy to contract severely in the first two quarters of the year. In the third quarter Japan will likely return to the positive growth. In 2012 Japanese GDP may add 2.9% helped by the reconstruction.
These forecasts are based on assumption that the ***ushima crisis will be contained and the rolling blackouts by Tepco will finish as planned at the end of April.
Deutsche Bank: QE2 turned out to be efficient enough
Monetary stimulus measures conducted by the Federal Reserve have shown rather impressive results.
Since the Fed’s Chairman Ben S. Bernanke claimed on August 27 that it’s necessary to launch additional asset purchase program, the Standard & Poor’s 500 Index of stocks gained 18%. According to Bank of America Merrill Lynch index, the risk premium on high-yield, high-risk bonds decreased from 6.81% to 5.16%. Inflation expectations rose by 44.4%, while the unemployment rate has fallen to 8.9% in February, the lowest since April 2009.
Analysts at Deutsche Bank Securities approve the approach of US monetary authorities noting that the deflation risk has been successfully eliminated that helped the stock market rise.
The QE2 began on November 3 and is scheduled to last until the end of June. The Fed pledged to but $600 billion of Treasuries. The QE1 accounted for $1.7 trillion of asset purchases and finished in March 2010. The QE was criticized by the Republicans who feared the surge in prices. However, core inflation rose in January only by 0.2% in comparison with 2010 level.