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Yen Declines as Risk Appetite Remains in Currency Markets

Sun, Mar 15 2009, 21:47 GMT
by Nick Nasad

CMS Forex

NZ Retail Sales Down 1.1% in January

New Zealand retail sales fell 1.1% in January compared to December, as sales of motor vehicles were down 11% and New Zealanders spent 2.6% less on fuel. Excluding the auto sector the core rate of retail sales actually showed a bigger than expected increase of 0.3%.

NZD/JPY - Kiwi Gains on Rise in Risk Appetite as Asian Stocks Climb

The New Zealand Dollar-Japanese Yen pair rose higher today, extending its gains from yesterday. Despite the weaker retail sales data from New Zealand, the Kiwi was boosted by risk appetite in Asian and European equity markets, that rallied following yesterday's jump in US stocks. That helped the Kiwi move to its highest level since January 12th at 51.85 and the pair now is at its resistance level for its upward channel started in mid February.

SWZ Producer and Import Prices Fall More Than Expected in February

In Switzerland producer and import prices fell 0.6% in February compared to January, and 1.8% in annual terms, accelerated a pace of falling prices that may pose the threat of deflation. A strong Swiss Franc is making imports cheaper from abroad and may be part of the reason that the Swiss National Bank decided to intervene in currency markets to weaker the Franc. Import prices are now down 5% on the year.

EUR Retail Sales up 0.1% on Month, Annual Rate Declines 8th Straight Month

Euro-zone retail sales rose 0.1% on the month in January, though the annual rate showed its eighth straight decline, the longest run of annual declines on record. The 2.2% decline in annual terms shows that the usual post-Christmas discounts did little to get shoppers to open their wallets. December's data was revised down as well.

EUR/JPY - Euro Moves Above Recent Resistance vs Yen

The Euro-Yen pair climbed higher to test the 127.69 level in today's session, which moves the pair above resistance near the 126 level that had held the last three weeks. As we mentioned before, European stocks rallied helping to boost risk appetite, but the Euro rally stalled in NY trading as stocks moved from into negative territory in the morning.

EUR/CHF - Franc Holds Gains From Yesterday, But Volatility Decreases

The Euro-Franc pair, following its surge yesterday, rose higher to the 1.54 area, though today's session saw a marked decrease in volatility in the pair.

US Trade Deficit Falls to Lowest in 6 Years on Pullback in Imports

The US trade deficit narrowed more than expected in January, coming in at a deficit of $36 billion. That was the smallest trade gap in 6 years, and was mainly driven by a larger fall in imports that outpaced the fall in exports. Imports fell 6.7% as America and its consumers cut back on spending on oil and foreign cars. The US spent $4.3 billion less on purchases of crude oil, and demand for automobiles dropped by $3.3 billion. Of course global trade is falling both ways and US exports fell by 5.7% on the month, reflecting the weakening demand abroad for US goods which should continue to pressure the US manufacturing sector.

US Import Prices Fall 0.2%, Consumer Confidence Edges Up Slightly

US import prices fell 0.2% on the month, the seventh month of decline, though the fall was smaller than anticipated. The 12.8% annual drop was the biggest since the index was first published in 1982. Consumer sentiment throughout the middle of March held largely stable to February's level. The index was at 56.6 which beat expectations on the upside.

EUR/USD - Euro Consolidates, Maintaining Gains

The Euro-Dollar pair consolidated in a range between 1.2870 and 1.2960 in today's session, managing to hold on to most of the gains it has accumulated this week. It remains to be seen if the recent Euro strength persists next week and in the weeks to come.

GBP/USD - Pound Rallies on Higher Equities

The Pound-Dollar pair meanwhile, fell below the 1.39 level overnight, as the pair retraced part of yesterday's later rally. Following that kickback, the Pound jumped higher in the European session as stocks in London started strong. The Pound reached the 1.4070 level before stalling and reversing part of those gains in NY trading.

CAN Economy Sheds 82.6K Jobs

In Canada, the economy shed 82.6K jobs in February, a larger fall in employment than expected. There were 111K full-time jobs lost, while part-time work edged up slightly. The unemployment rate rose by half a percent to 7.7% from January's 7.2%.

CAN Trade Deficit Hits Record

The Canadian trade balance added a second piece of negative fundamental news, as January saw a record C$1 billion deficit. Exports fell 9% while imports fell 7.9%, a large reduction in trade precipitated by weaker car sales abroad. Lower imports of automotive products and machinery and equipment accounted for nearly three-quarters of the monthly decline in January.

USD/CAD - Loonie Brushes Off Weak News To Gain

The US Dollar-Canadian Dollar pair, which hit an intra-day high of 1.2840 prior to the Canadian news, fell in favor of the Loonie, fining support at the 1.2625 level. The Canadian Dollar was able to shrug off its negative news and gained as investor sentiment turned for the better this week.

Next Week's Key Releases

Next week, we get producer and consumer prices from the US, along with another FOMC meeting. Other important releases include UK employment data, retail sales from Canada and the ZEW economic sentiment index from Germany.

Published on  Sun, Mar 15 2009, 21:53 GMT