Wednesday during early deals, the Japanese yen showed strength against its major counterparts as a slide in most Asian stocks increased demand for the safety of the Japanese currency. The yen jumped to a 2-day high against the euro, the franc and the kiwi.
The Nikkei Stock Average closed today at 8,479.99, down 0.1% from Tuesday as bank stocks such as Mitsubishi UFJ Financial Group, the country's top lender, took a breathe.
New York stocks fell yesterday as investors took profits after the Dow Jones Industrial Average marked the largest single-day point gain the previous day.
At a White House press conference yesterday, U.S. President Barack Obama called the U.S. dollar ''extraordinarily strong'' because of confidence in U.S. economic prospects and said he sees no need for a single global currency. But his comment had little impact on the currency market.
The yen has been viewed as a safe-haven currency amid the global financial crisis, and it often fluctuates depending on perceived shifts in investors' tolerance for risk.
In carry trade, investors borrow money from Japan where the interest rate is low to buy high yielding assets in other countries. So, an unwinding of carry trades results in traders liquidating their investments and scrambling for yen to repay their yen-denominated loans, which pushes up the value of the Japanese currency.
The yen also gained today as a government report showed that Japan posted trade surplus in February for the first time in five months.
The Ministry of Finance said that Japan saw a merchandise trade balance of 82.4 billion yen in February, marking the first surplus in five months. The February figure came in better than expectations for a 13.7 billion yen deficit following the revised record 956.9 billion yen shortfall in January. The original figure came in at -952.6 billion yen.
Exports plummeted by a record 49.9 percent on year to 3.525 trillion yen, the data showed, falling for the fifth consecutive month. That was worse than forecasts that had predicted an annual decline of 47.6 percent after the 45.7 percent fall in January.
Imports fell 43.0 percent on year to 3.443 trillion yen, declining for the fourth straight month. Analysts had expected a fall of 38.4 percent on year after the revised 31.9 percent decline in the previous month.
Meanwhile, the Bank of Japan Deputy Governor Hirohide Yamaguchi said today that Japan's economic and financial conditions will likely continue to be severe. Addressing business leaders in Otaru, Yamaguchi said at this point, the central bank is giving higher priority for securing market stability and facilitating corporate financing, which are the second and third main areas of the BoJ's conduct of monetary policy.
He said the BoJ will continue to examine carefully developments in financial markets and corporate financing adding that the bank will take necessary measures in a decisive manner without any predetermined view.
Japan's currency had its worst month in February in more than a decade after a government report showed the economy shrank the most since 1974 last quarter and former Finance Minister Shoichi Nakagawa resigned.
During early deals on Wednesday, the yen advanced against the currencies of Europe and Switzerland. At about 1:40 am ET, the yen reached a 2-day high of 131.02 against the euro and 86.12 against the franc, compared to yesterday's close of 131.83 and 86.50, respectively. The next upside target level for the Japanese currency is seen at 128.4 against the euro and 83.5 against the franc.
Against the US and Canadian dollars, the yen strengthened to 97.43 and 79.15, respectively by about 1:40 am ET Wednesday. If the yen climbs further, it may likely target 95.7 against the greenback and 78.00 against the loonie. At yesterday's close, the dollar-yen pair was quoted at 97.88 and the loonie-yen pair at 79.50.
In early trading on Wednesday, the yen rose to 142.79 against the British pound. This may be compared to Tuesday's closing value of 143.72. On the upside, 141.9 is seen as the next target level for the Japanese currency.
The yen that closed yesterday's trading at 55.14 against the NZ dollar climbed to a 2-day high of 54.47 during early deals on Wednesday. The next upside target level for the yen is seen at 51.6.
The kiwi tumbled as New Zealand's consumer confidence index declined in the first quarter of 2009. New Zealand's consumer confidence index fell to 96 in the first quarter from 101.3 in the fourth quarter, the latest survey by Westpac Institutional Bank and McDermott Miller Ltd. showed today.
However, the confidence indicator was still above the low reading of 81.7 reached in June last year, when high interest rates, petrol prices and other costs squeezed consumer budgets. In the first quarter, the present conditions index slipped to 90.7 from 95 in the previous quarter. At the same time, the future conditions index dropped to 99.6 from 105.5 in the December quarter.
The yen jumped to 67.73 against the aussie at 9:15 pm ET Tuesday. Thereafter, the yen eased but rebounded shortly and the pair is now worth 68.07 with 65.5 seen as the next likely target level. The aussie-yen pair closed yesterday's North American session at 68.09.
The Australian government will provide a time-limited voluntary guarantee over state government borrowing, Treasurer Wayne Swan said today. The guarantee will be provided for existing and new issuances of securities, but the scheme will not cover issuances denominated in foreign currencies. The scheme will allow states to readily structure their finance requirements to meet their longer term infrastructure plans.
Traders now await the European session, in which the Italian consumer confidence index, German IFO business climate index and the UK CBI distributive trades survey report-all for the month of March are expected.
Turning to the US, the Commerce Department is set to release its durable goods orders report at 8:30 am ET. Economists look forward to a 2% decline in the durable goods orders for February.
At 10:00 am ET, the Commerce Department is due to release its new home sales report for February. The consensus estimate calls for a decline in new homes sales to 300,000.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report at 10:30 am ET.
Cleveland Federal Reserve Bank Sandra Pianalto is due to deliver a speech on forces for economic recovery Regional Growth Partnership luncheon in Maumee, Ohio at 12:20 pm ET. Meanwhile, San Francisco Federal Reserve Bank Janet Yellen is scheduled to deliver a speech to the Forecasters Club of New York on the U.S. economic situation and policy responses in New York at 12:30 pm ET.
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