Daily FX Market Outlook by AceTrader 21-3-2011

Market Review – 18/03/2011 20:16 GMT

G7 jointly intervenes to weaken the Japanese yen

The greenback rallied against the Japanese yen on Friday as Group of Seven rich nations carried out the first coordinated intervention since 2000 following dollar’s sharp selloff to a post-World War II low of 76.25 on Thursday. Usd/jpy jumped from 78.83 at Tokyo morning when BOJ surprised the market by buying dollar aggressively at Tokyo opening, price later climbed to as high as 82.00 in European morning before ratcheting lower in European mid-day and NY session. The Japanese yen also weakened on crosses, eur/jpy, gbp/jpy and aud/jpy surged from 110.61 to 115.56, 127.54 to 132.48 and 77.41 to 81.42 respectively before stabilizing in NY trading.

  
  
Japan’s Finance Minister Yoshihiko Noda told reporters that each of the G-7 member would sell yen as their markets open, including ECB, BOE, the U.S. Fed, Bank of Canada, Swiss National Bank, and Bank of France. Traders reported BOJ may have sold 2.1 trillion yen (approximately USD 25 bln). Bank of Canada said size of intervention will be disclosed in monthly foreign reserves report in early April.   
  
The last time G7 joint currency intervention took place was in September 2000 to prop up the single currency when euro fell to an all time low of 0.8228 in October 2000 after its debut in January 1999.   
  
In addition, BOJ added 4 trillion yen to Japan’s financial system on Friday, bringing its emergency fund injections this week to a total of 38 trillion yen.  
  
The euro rose to a fresh four-month high on Friday after the intervention of ECB in eur/yen. Despite dipping briefly to 1.3980 after BOJ’s intervention in the Asian morning, the single currency found renewed buying there and later jumped to 1.4088 after Japan’s FINMIN Noda said ‘possible that ECB may intervene in eur/yen’. The euro continued to ratchet higher in European session and eventually extended gain to a fresh 4-month high of 1.4185 in NY mid-day after ECB President Jean-Claude Trichet said ‘nothing to add on monetary policy’ in coming month.  
  
The British pound rose against the dollar in volatile Friday session. Despite cable’s rebound to 1.6194 following a brief but sharp fall to 1.6099 in Asian morning partly due to much weaker-than-expected UK Nationwide consumer confidence data, cross-selling in sterling versus euro pressured the pound to 1.6060 before staging a strong rebound in European mid-day and price later surged to this week’s high of 1.6258 in tandem with euro in late NY session. Eur/gbp rose from 0.8677 to as high as 0.8760 before retreating.  
  
U.K. consumer confidence in February fell 10 points to 38, the lowest since records began in 2004 as Britons grew more pessimistic about the sustainability of the economic recovery and the outlook for jobs, Nationwide Building Society said.  
  
China’s central bank had raised lenders’ reserve requirement ratio by 50 basis points, the third time this year and the sixth since November. The move increased the required reserve ratio for the country’s biggest banks to a record 20.0 percent, another step in the government’s campaign to control inflation.  
  
In other news, U.N. Security Council had passed a resolution to impose a no-fly zone over Libya and Libya eventually accepted the U.N. resolution for immediate ceasefire and encouraged opening of all dialogue with all sides. France, the United States, Britain and Arab states demanded that Libyan leader Muammar Gaddafi halt a troop advance and reconnect power and water to Libyan towns where they have been cut.  
  
Data to be released next week include:  
  
Monday will be a holiday in Japan on Monday.   
  
U.K. Rightmove house price and U.S. Existing home sales on Monday;  
  
U.K. CPI, RPI, PSNCR, PS net borrowing and CBI Orders, US Richmond Fed manufacturing index, Canada Leading indicators and retail sales on Tuesday;  
  
U.K. Bank of England meeting minutes, Budget report, Eurozone industrial orders and consumer sentiment, U.S. new home sales on Wednesday;  
  
Japan Import/Export and trade balance. Germany Import price index, manufacturing and service PMI, Eurozone manufacturing and service PMI, U.K. retail sales, U.S. jobless claims and durable goods on Thursday;  
  
Japan Tokyo CPI and national CPI, Germany Ifo index, U.S. GDP, PCE core and U. Michigan survey on Friday.

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