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The Yen Declines as stocks gain and the carry trade increases

Fri, Sep 12 2008, 10:43 GMT
by Benny Menashe

Finotec Group Inc.


EUR/USDUSD/JPYGBP/USDUSD/CHF
1.425108.451.77251.1605
Resistance1.4225108.151.77051.146
1.418107.61.76951.1415
1.3975106.051.7541.1325
Support1.3885105.551.7451.1215
1.386104.751.7421.113

The yen fell on speculation that Lehman Brothers Holdings Inc. will find a buyer, giving investor’s confidence to buy higher-yielding assets funded in the Japanese currency. The yen snapped four days of gains against the euro as any government-brokered takeover of the bank would help support credit markets. U.S. officials, who are helping Lehman identify potential acquirers might announce a take-over before the 15th of September. ``There's likely to be a buyer somewhere for Lehman,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``Risk appetite may improve a bit. The yen could be sold.'' The USD/JPY is currently trading at 107.50 as of 7:38am, GMT.

Bank of England Governor Mervyn King, 60, told lawmakers in London yesterday it's an ``illusion'' that the government could rescue the housing market without jeopardizing taxpayers' money and warned that increases in government spending risk fuelling inflation expectations. ``The governor seemed to be firing some warning shots,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. ``It was interesting the amount of emphasis he put on the implications of the taxpayer underwriting the mortgage-lending process.'' The GBP/USD is currently trading at $1.7682 as of 8:07am, GMT.

The Australian dollar rose as Asian equities rallied, increasing investors' appetite for higher-yielding assets. The currency climbed from two-year lows against the yen as Asian stocks gained for the first time in four days on speculation a possible purchase of Lehman Brothers Holdings Inc. will help stabilize markets. That gave investors confidence to return to so-called carry trades. Australia's currency also advanced as traders pared bets the central bank will reduce interest rates next month. ``We've got quite a strong rebound under way,'' said Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. ``Any resolution of the Lehman issue will see risk appetite increased and you're seeing that now on the yen crosses like the Aussie-yen.'' The AUD/USD is currently trading at 0.8090 as of 8:14am, GMT.

Pie Chart


Today's Economic Events

Time Event Currency Period Previous Forecast Significance Actual
14:00Business Inventories m/mUSDJul0.70%0.50%2
12:30Core Retail Sales m/mUSDAug0.40%-0.20%3
12:30PPI m/mUSDAug1.20%-0.50%3
12:30Retail Sales m/mUSDAug-0.10%0.20%3
12:30Core PPI m/mUSDAug0.70%0.20%3
9:00Industrial Production m/mEURJul0.00%-0.20%2-0.30%
9:00Employment ChangeEURQuarterly0.30%10.20%
8:00Industrial Production m/mEURJul0.10%-0.50%2-1.10%
6:45CPI m/mEURAug-0.20%0.10%20.00%


Finotec  | Global financial trading center, 1 Grivas Digheni and Chrysanthou, 3035 Mylona P.O.B 58007, Limassol
http://www.finotec.com/ | support@finotec.com

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