The Yen strikes back
Market Highlights
New Zealand: NZD/USD Past 5 days
International: EUR/USD Past 5 days
Today's commentary
Boosted by investor sentiment the JPY jumped overnight, forcing the high-yielding Kiwi down against the USD as its support base was further eroded.
The JPY’s gain has come as investors worldwide anticipate sizeable rate cuts this week from the RBA and RBNZ. As the domestic inflation rates fall in both countries (helped by sharply dropping oil prices) the focus for both central banks has switched to jump-starting their faltering economies - and the main weapon at their disposal is to cut interest rates. With recent poor data being released in both countries the market expectations for the cuts has continued to increase; with the RBA expected to cut by 1% this afternoon and the RBNZ now expected to cut by 1.5% on Thursday. These interest rate cuts, coupled with a volatile global market, have seen investors retreat to the JPY and USD, and both of those currencies have strengthened accordingly – though continuing bad economic news in the US has seen the JPY being the main benefactor.
The GBP also had a bad night ahead of the Thursday’s BoE rate announcement. UK manufacturing data showed that the sector slumped to its weakest level since the series was created 16 years ago, whilst mortgage lending data also fell to a series low in October. The expectation is now for the BoE to also aggressively cut the UK interest rate – potentially by another 1% (after November’s 1.5% cut), which saw the GBP suffer the same fate overnight as the Kiwi and AUD.
As mentioned, the big news today is the RBA announcement – expect a volatile day’s trading ahead for the Kiwi.
Upcoming Announcements
- 02 Dec 2008: AU Retail Sales (Oct)
- 02 Dec 2008: RBA Interest Rate Decision
- 04 Dec 2008: RBNZ Interest Rate Decision
- 04 Dec 2008: ECB Interest Rate Decision
- 04 Dec 2008: BoE Interest Rate Decision
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