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Daily Analysis

Bank of Japan may raise interested rates, Sterling hits record

Tue, Jul 15 2008, 11:21 GMT
by Benny Menashe

Finotec Group Inc.

The yen may rise as high as 100 per dollar this year as the Bank of Japan is more likely to raise interest rates than the Federal Reserve, said Toyoo Gyohten, former currency-policy chief at Japan's Ministry of Finance. The Bank of Japan, which left rates unchanged at a policy meeting today, may lift borrowing costs should inflation pick up and the economy sustain growth of at least 1 percent. Futures traders ruled out the chance of a Fed increase next month as shares of Freddie Mac and Fannie Mae, the biggest U.S. mortgage finance companies, almost halved last week. ``The Fed is most likely to maintain its current level of interest rates,'' Gyohten, president for the Institute of International Monetary Affairs in Tokyo, said in an interview yesterday. ``The BOJ is more likely to raise rates. The medium- term trend is for a weaker dollar and a stronger yen.'' USD/JPY currently trading at 105.43 as of 7:56 am, GMT.

U.K. house-price’s declined in June, a number of residential property agents and surveyors said prices fell exceeding those who reported gains by 88 percentage points, a London-based group said today. That compares with 92.2 percent the previous month, and 94.2 in April, the worst since the series began. The reading for London prices was minus 88. On the other hand the UK’s CPI which is the inflation rate came in higher than expected at 3.8% from an expected 3.6% which was a catalyst for the sterling to reach 2.0159 today. The GBP/USD is currently trading at 2.0091 as of 8:48 am, GMT.

German investor confidence probably dropped to the lowest level in almost 16 years in July as faster inflation and higher interest rates worsened the outlook for growth in Europe's largest economy, a survey of economists and traders showed. Record oil and food prices prompted the European Central Bank to raise its key rate by a quarter point to 4.25 percent this month, further squeezing purchasing power. With a stronger euro weighing on exports and the deepening U.S. housing slump damping confidence worldwide, Germany's benchmark DAX share index has dropped 7 percent in the past month and 23 percent this year. ``Higher inflation, the slump in equity markets and the ECB's interest-rate hike are all weighing on sentiment,'' said Juergen Michels, an economist at Citigroup Inc. in London. ``Freddie Mac and Fannie Mae may add to this trend.'' EUR/USD currently trading at 1.5986 as of 8:25 am, GMT.

Today's Economic Events

Published on  Tue, Jul 15 2008, 11:29 GMT

Archive

• Yen falls on US Government bailout
  Published On Mon, Sep 8 2008, 10:40 GMT
• Yen surges as Carry Trades unwind
  Published On Fri, Sep 5 2008, 11:02 GMT
• ISM Non-manufacturing in the U.S probably shrank in August
  Published On Thu, Sep 4 2008, 10:02 GMT
• Cable lowest in 2 1/2 years
  Published On Wed, Sep 3 2008, 10:21 GMT
• Dollar rises against the Euro and the sterling as oil falls
  Published On Tue, Sep 2 2008, 10:31 GMT

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