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Daily Forex Commentary

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Focus on AUD, NZD and Turkish CPI

Wed, Sep 3 2008, 06:52 GMT
by Jyske Bank Team

Jyske Bank

Today’s comment

Majors & Scandies

By the Majors & Scandis Team

Japanese loosing their nerves

Apparently Mr. & Mrs. Japan - also known as Mr. & Mrs. Watanabe - are finally starting to loose their nerves. Looking at the recent market moves in the fx-market it certainly looks like it. The yen keeps climbing steadily higher whereas both AUD and NZD are diving rapidly. In their hunt for higher yields especially the Japanese retail investors have been looking towards Australia and New Zealand for attractive yields thereby pressuring their own currency - the yen - extremely. The rapid economic deterioration in those countries - pressured by both the dropping commodity prices and the debtridden economies - is really starting to bite. In both countries the central banks have started new monetary easing cycles which undermines the AUD and NZD too. Expect more of the same as regards to JPY, AUD and NZD. It ain't over till its over. We are now headed towards our first short term target in EUR/JPY at 156 but long term we still foresee a serious appreciation of the yen in general.

EUR/USD is still dropping like a stone. A lot of market participants have been trying to catch a falling knife so far in vain. Whether or not it is getting too bloody is difficult to say. We still expect at least a test of our first target at 143.00 - 143.50 where we recommend to take profit in the first round.

Emerging Markets

By the Emerging Markets Team

Turkish CPI today

We look forward to the Turkish CPI for August today. In June, the inflation rate fell for the first time this year, to 10.61% y/y from 10.73% in May, but the rate rose again in July to 12.06%, a two year high. Market participants expect inflation for August to come to 12.3% y/y. Still, the central bank, CBRT, expects the inflation rate to ease in the longer term. The CBRT has raised interest rates by 1.50 percentage points in 2008 to 16.75%, but they were left unchanged at the meeting in August. The market now speculates in cuts of totally 50 basis points this year. We do, however, still assess that due to continued high inflation and continued high inflation expectations it is most likely that the CBRT will be forced to raise interest rates by an additional 0.25-0.50 percentage point before the end of the year. If we are right in our forecast it will be supportive for Turkish lira, and thus we keep our BUY recommendation on TRY.

Today’s Key Events

• 09:00 Tradebalance, Hungary

• 09:00 Industrial production, Romania

• 11:00 Retail sales, Euroland

• 11:00 GDP, 2. quarter, Euroland

• 11:00 Tradebalance, Iceland

• 15:00 Interest rate meeting, Canada

• 16:00 Factory orders, USA

• 16:00 CPI and PPI, Turkey

• 20:00 Beige Book, USA

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Published on  Wed, Sep 3 2008, 09:52 GMT