Monday in Asia, the yen slumped to new multi-month lows against its most major counterparts after a government report showed that confidence among Japanese manufacturers worsened in the first quarter of 2009 as the deepening global recession spurred a record decline in exports and factory outputs.
The yen plummeted to a 5-month low against the euro, 2 1/2 -month low against the franc, the aussie and the kiwi. The yen also weakened to new multi-week lows against the loonie and the pound and a 4-day low against the US dollar.
Japan's Finance Ministry and Cabinet Office said that the large company business sentiment index came in at -51.3 in the first quarter of 2009, compared to -35.7 in the fourth quarter. Negative readings indicate more companies are pessimistic about the economy than are optimistic. The survey's large manufacturers index deteriorated to minus 66.0 versus the fourth quarter reading of minus 35.7.
Investors also reacted to the Japanese Finance Minister Kaoru Yosano's comments that a massive government stimulus package would be necessary to prevent the current fiscal quarter from repeating the 12.1 percent economic contraction seen in the fourth quarter of 2008.
Finance Minister Kaoru Yosano's comments came in a televised interview today. It's not a situation where new fiscal spending of 2 to 3 trillion yen would be enough of a remedy. The amount of 20 trillion yen is not out of line. although the size of a new package had not yet been decided. Yosana said. The finance minister also said the economy was expected to have contracted at the same 12.1 percent full-year rate in the current quarter as it did in the previous quarter.
The yen also declined as strong equity markets increased investors appetite for riskier assets. Asian stocks rose today, with Japan's Nikkei at a one-month high, and oil prices climbing toward $53 a barrel as investors are hopeful about an imminent U.S. plan to clean up the financial system by absorbing toxic bank assets and about the impact of recent measures to stabilize financial markets and shore up key economies.
U.S. Treasury Secretary Timothy Geithner is expected to provide details on the public-private partnership to remove bad loans from the banking system later today, though investors were already lifting equities and selling safe havens such as dollar and yen.
Global equities have been rallying for nearly two weeks on confidence the financial system was stabilizing after some of the largest U.S. banks said they had solid results in the first two months of the year, feeding confidence among investors to buy back riskier assets and slowly let go of safe havens.
During Asian deals on Monday, the yen slumped to its lowest level in almost 5-months against the euro, hitting 132.01 at 10:40 pm ET. If the Japanese currency moves down further, it may likely target the 135 level. The euro-yen pair was worth 130.02 at last week's close.
The euro hit a five-month high against the yen, following remarks by European Central Bank President Jean-Claude Trichet underscoring that rates were already at low levels and may turn to unconventional measures to shore up the banking system. European Central Bank chief Jean-Claude Trichet signaled the central bank remained wary of interest rates falling to zero, in contrast to the U.S. and Japan, where rates are already almost zero, media reports said today.
After hitting a record low of 170.00 in July 2008, the yen gained 34% against the euro and reached a 7-year high of 112.08 on January 21, 2009, as yen was viewed as a safe heaven as more than $1 trillion of credit-market losses sparked a seizure in money markets and threw major economies into a recession.
However, the yen lost ground on January 22 after the Japanese government lowered its median view for real GDP in the current fiscal year. Adding to yen's selling pressure, a report on February 16 showed that Japan's fourth quarter GDP posted its biggest decline since the first quarter of 1974.
The yen extended its slide in the subsequent weeks and has dropped 15% thus far from a 7-year high.
The yen, which closed last week's deals at 138.35 against the pound, fell to an 18-day low of 140.27 in Asian trading on Monday. If the yen slides further, it may find support around the 141.6 level.
The yen has been weakening against the pound after it surged to a 3-week high of 131.54 on March 12. Since then, the yen has depreciated 6% against the pound.
In Asian deals on Monday, the yen weakened to a 2 1/2 -month low of 85.97 against the Swiss franc. This may be compared to last week's close of 84.92. On the downside, 87.1 is seen as the next target level for the Japanese currency.
The yen slipped to a 4-day low of 96.57 against the dollar during Asian deals on Monday. The next downside target for the yen is seen around the 99 level.
The dollar jumped to a 4-month high of 99.69 against the yen on March 05. Although the dollar-yen pair eased thereafter, it bounced between 99.20 and 96.60 until the dollar was sold off massively on March 18 after the Fed surprised investors by announcing it would buy $300 billion worth of U.S. Treasuries for the first time since the early 1960s as part of a move to inject an additional $1 trillion into the U.S. economy by also purchasing more U.S. mortgage and agency debt.
The dollar tumbled to a 24-day low of 93.56 against the yen last Thursday. However, the dollar-yen pair recovered slightly on Friday and closed the week's deals at 95.78. Overall, the dollar-yen pair has lost 2.54% last week.
During Asian deals on Monday, the yen declined to a 24-day low of 78.31 against the Canadian dollar. On the downside, 79.5 is seen as the next target level for the yen. At last week's close, the loonie-yen pair was quoted at 77.22.
Against the currencies of Australia and New Zealand, the yen plummeted to a 2 1/2 -month low of 67.29 and 64.62 in Asian trading on Monday. If the Japanese currency drops further, it may likely target 68.3 against the aussie and 56.4 against the kiwi. The aussie-yen and the kiwi-yen pairs were worth 65.70 and 53.48, respectively at Friday's close.
The Australian dollar and New Zealand dollar gained as stocks rallied on optimism that U.S. plans to keep borrowing costs low will boost growth in the world's largest economy. Benchmark interest rates are 3 percent in New Zealand and 3.25 percent in Australia, the highest among the major industrialized nations.
Australian Prime Minister Kevin Rudd said today that it will be virtually impossible for the nation to avoid a recession. In his comments made prior to a trip to Washington, DC and then to the G20 Summit in London, Rudd warned that Australia's financial crisis will get worse before it gets better.
It's clear that the impact of a worsening global economic recession will make it virtually impossible for Australia to sustain a positive economic growth for the period ahead, said Rudd. He added that the impact will affect the national budget and employment which underlines the importance of global action in response to the global recession.
Looking ahead, the Euro-zone January trade balance and the Swiss February M3 money supply reports are expected in the upcoming European session.
Across the Atlantic, the Canadian leading indicators and the US existing home sales-both for the month of February have been scheduled for release in the North American session.
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