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Daily Analysis

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Expectations for Rate Cuts Support The Yen

Mon, Dec 1 2008, 11:54 GMT
by Benny Menashe

Finotec Group Inc.

The Japanese Yen open the week with a strong momentum on expectations of global interest rate cuts. The BOE, ECB, RBA, RBNZ are expected to lower their overnight rates from 0.5% to 1.5%. The sharp drop in inflationary pressures is allowing central bankers to focus on growth. The lowering of the interest rate is eroding the appeal of the carry trade and supporting the strengthening of the Yen. The red colure on Asia Europe and US futures boards is giving further support to the movement of the yen. On the technical point of view the 95 support level was broken downward and traders will look for the October lows of 90.90. The yen was trading around the levels of 94 against the dollar at 10:10 (GMT).

"Currencies where rates are heading down toward zero should continue to suffer, and those that are already close to zero should continue to benefit," said Neil Jones, head of hedge fund sales at Mizuho.
Analysts expect the RBA to cut its benchmark cash rate by 75 basis points to 4.50 percent on Tuesday. But data on Monday showing Australian inflation slowing much faster than earlier thought and manufacturing activity at record lows in November bolstered the case for a steeper cut in rates. The BOE is expected to slash 1% the RBNZ 1.5%, the ECB is expected to lower the rates at 0.5%.

Traders will be eying the US ISM manufacturing PMI at 15:00(GMT) which is expected to show further decline in the economic activity. At 18:45 (GMT) Fed chairman Ben Bernanke will speak at the chamber of commerce, in Austin. Earlier at 13:30 (GMT) Canada will publish the GDP data which is expected to show a slight recovery.

Today's Economic Events

Published on  Mon, Dec 1 2008, 12:09 GMT