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Daily FX Report

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Japan's trade balance swung into a deficit of 63.9 billion JPY in October

Thu, Nov 20 2008, 09:50 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

Good morning from Hamburg. Oh, shame on us. Yesterday there was the soccer prestige duel Germany against England in Berlin and we lost it 1:2 as well the EUR lost 0.7 % versus the GBP. We think this is a good chance to congratulate all English soccer fans who make FX trading.

Market review

In October the RBA bought a net of 3.15 billion AUD to turn away a plunge in the currency. This was the largest amount ever bought in a single month and the first net purchase since 2001. The central bank intervened in late October to buy the currency as it collapsed to 0.60 versus USD amid global market turmoil. The intervention had the effect that the AUD/USD rebounded from the low and gained 5 % in three weeks.

Japan’s trade balance swung into a deficit of 63.9 billion JPY in October. The data reinforce worries that sluggish exports may push the economy deeper into recession. Furthermore foreign investors sold a net of 512.8 billion JPY in Japan stocks before the week ends on November 15th, MOF’s capital flow data shows. This marks the 5th straight week of Japan stock selling by foreign investors. Japanese investors bought 213.9 billion JPY of foreign bonds during the same week. Hereupon the USD/JPY reached a one-week low of 94.96. Additionally traders expect a continued strong JPY because investors will continue to unwinding carry trades.

Bank of England Deputy Governor John Gieve said on Wednesday that the BoE may need to cut interest rates further because inflation is likely to fall below the target over the medium term. The GBP changed a little against the USD at 1.4970 and Sterling gained 0.7 % versus the CHF and 2 % versus the CAD.

EUR/USD

In the end of October the EUR resisted at 1.30. After a decline the European currency developed a new resistance at 1.28 but a downward trend line shows constant direction to the bottom. But weak US economy data could turn the rally of the USD.

GBP/CHF

The GBP/CHF touched the bottom line of the Bollinger Bands at the beginning of this week and retuned to the middle line. Since the end of September the currency didn’t cross the middle line clearly, so further losses might be possible, despite the GBP/CHF cross the medium line clearly.

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Published on  Thu, Nov 20 2008, 09:55 GMT