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USD slides in Asia despite Fed's emergency action

Wed, Mar 12 2008, 03:46 GMT
by Eben Esterhuizen

TradeTheNews.com

- The USD benefited from the Fed's emergency action, but failed to hang on to New York gains during the Asian session as some investors feel the Fed's $200B lending program is a short-term fix at best. Markets seem to confirm this skepticism: The Nikkei failed to hang on to gains above 13,000, the S&P/ASX200 rebound was capped by 5,300, currency traders offered AUD/USD at 0.93 and USD/JPY was sold at the overnight high at 103.40. Also worth noting, the S&P futures contract could not extend New York gains. Perhaps more interestingly, speculation is growing that the Reserve Bank of Australia will have to reverse rate hikes later this year as global growth slows down despite central bank efforts, with yields moving lower on the long end of the Aussie yield curve.

- Chinese retail sales surge in February: (CH FEB RETAIL SALES YTD: 20.2% V 19.0% expected, 20.2% prior) Analyst said strong retail sales growth has been driven by robust income growth, but they also pointed out that strong nominal retail sales growth is elevated by high inflation. "It is not a coincidence that China is running an 11-year high retail sales growth rate, while CPI inflation is also at an 11-year record high," said Goldman Sachs in a note to clients.

- Japan's trade started the year on a firm footing despite fears of an export slowdown: (JP JAN CURRENT ACCOUNT: ¥1.24T V ¥1.25T expected, ¥1.70T prior; ADJUSTED: ¥2.07T V 1.93T expected, 1.86T prior) Japan's current account surplus rose 8.1% in January from a year earlier, an improvement from December's data. In December, the current account shrank for the first time in 12 months, decreasing 4.7% y/y.

- Japan's revised Q4 GDP data better than expected: (JP Q4 FINAL GDP QOQ: 0.9% V 0.6% expected, 0.9% prior; ANNUALIZED: 3.5% V 2.3% expected, 3.7% prior; Nominal GDP QoQ: 0.2% v 0.0% expected, 0.3% prior) Analysts said the GDP data confirms that the peak of the Japanese economy was during the Oct-Dec quarter last year, and several commentators expect an interest rate cut under the new Bank of Japan leadership. Q4 "growth was driven by foreign demand," said Taro Saito at Nissay Research.

- An old member of Japan's Ministry of Finance, Mr. Sakakibara ("Mr. Yen"), said that the subprime turmoil is not affecting Japan. He added that currency markets assume USD/JPY to fall below ¥100, and he said he expects the pair to break below ¥100 in 2-3 weeks.

- (JP) FEB DOMESTIC CORPORATE GOODS PRICE MOM: 0.4% V 0.3% expected, 0.2% prior; YOY: 3.4% V 3.3% expected, 3.0% prior

- The minutes from the Bank of Japan's February meeting offered no surprises, and the board said that their basic thinking on policy is unchanged. Members agreed that downside risks to global economy have risen, and many said that domestic factors can hurt Japan's growth cycle.

- Equities: At 23:28 EDT Japan's Nikkei is +2.70%, the S&P/ASX200 is +2.91%, South Korea's KOSPI is +2.14%, and the Shanghai Composite Index is -0.46%. The S&P futures contract failed to extend New York session gains, and lost -0.05% between 16:30 EDT and 23:30 EDT. The big winners in Tokyo include exporters and financials, while miners and banks lifted the S&P/ASX200. The Kospi is sharply higher on gains in shares of shipping companies and financials, while energy companied and insurers led the charge in Shanghai. Hong Kong's Hang Seng index is higher by +2.52%, boosted by gains in shares of financials and energy producers.

- Commodities: Nymex crude oil lost -0.09% between 18:00 EDT and 23:36 EDT, last trading around 108.65/bbl. Spot gold is little changed from levels seen at the New York close, but traders are saying that the current gold option market signals that the underlying futures could rise further. "They are buying futures and buying May puts, which usually means we are going higher," said Jonathan Jossen, independent floor trader in New York.

Published on  Wed, Mar 12 2008, 03:47 GMT