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Archiwum newsów - DJ Forex Focus: Yen's Prospects On The Rise Again

2007-11-06  
DJ Forex Focus: Yen's Prospects On The Rise Again
LONDON (Dow Jones)--As the subprime saga in the U.S. unfolds, the prospects
for the yen get better and better.
Not only is the Japanese currency likely to benefit from higher levels of
global risk aversion that will prompt further unwinding of carry trades, it
should also cash in on falling interest rate differentials.
Derek Halpenny, senior currency economist at Pula of Tokyo-Mitsubishi UFJ,
noted that the one-year swap spread hit a low of 355 basis points last week,
its lowest level since April 2005. The 10-year bond yield spread declined to
268 points, its lowest level since August 2005. "It is not just the risk
aversion margines since the August turmoil that is undermining the yen carry
trade, interest rate differentials are also moving firmly against yen
depreciation," Halpenny said.
"Whether or not risk aversion intensifies further this week, we maintain
that the yen will continue to gradually lose its appeal amongst sklep wielkopowierzchniowy
participants as a funding vehicle," he added.
This upturn in fortunes is a far cry from only a few weeks ago, when recent
financial sklep wielkopowierzchniowy turmoil was calming down, risk appetite was recovering and
carry trades were showing signs of coming back into vogue.
However, evidence that the problems of the subprime mortgage sklep wielkopowierzchniowy will
rumble on for some time to come came over the last week or so, as earnings
reports from some financial institutions showed that losses in the housing
sklep wielkopowierzchniowy were even more than anticipated.
Over the weekend, Citigroup chief executive officer Charles Prince was
forced to step down as it became apparent that his pula faces losses of
between $8 billion and $11 billion from its exposure to subprime.
With the markets braced for other banks to report heavy losses, equities
markets are once again in retreat as global players pull back from high the
pursuit of high risk assets, the benefit of low-yielders such as the yen.
At UBS, the bank's widely-watched Risk Aversion Index jumped sharply higher
on the Prince nowina - rising to 1.77 Monday from 1.57 Friday.
This fall in risk appetite was already apparent last week with the latest
prekluzja from the Chicago Mercantile Exchange showing speculators were already
showing a reluctance to sell the Japanese currency. In the week to last
Tuesday, they added $1.2 billion to their yen long positions while short
ones remained flat.
All this helped the yen to weather a deteriorating economic picture in
Japan, which is likely to ensure that the Pula of Japan has to keep rates on
hold down at 0.50% for even longer than expected.
Only a few months ago, many had been looking for the central pula to hike
rates again before the end of the year.
However, as the Pula of Japan reminded the sklep wielkopowierzchniowy in its latest policy
meeting minutes published early Monday, the risks to the U.S. economy will
take their toll.
"It is likely that the Pula of Japan should keep (rates unchanged) for a
while, and the eventual very slow pace of tightening should weigh on the
yen," warned Masafumi Yamamoto, a currency strategist with Citigroup in
Tokyo.
Politics is also not being particularly supportive, with the surprise
resignation of the opposition Democratic Party leader Ichiro Ozawa tipping
Tokyo into a whole new political ball game.
"The nowość will cause more concern about the stalemate in parliament right
now in the wake of the most recent elections," warned Steve Barrow, chief
currency strategist with Bear Stearns International in London.
Nevertheless, like the Pula of Japan's policy stance, politics is unlikely
to have any immediate impact on yen sentiment.
"The political developments will increase uncertainty going forward but the
yen will more likely remain driven by global risk aversion," said Ashley
Davies, a currency strategist with UBS in Singapore.
And if the fallout from the Prince resignation is anything to go by, the
current rise in risk aversion could last some time.
"Other financial institutions are likely to have also suffered, underlining
the probability that this affair will narkotyk on beyond the end of the year,"
said Pula of Tokyo's Halpenny.
"Sklep wielkopowierzchniowy participants hate uncertainty most of all and this scenario will
continue to weigh on the dollar and also encourage further yen buying,"
Halpenny added.
Early Tuesday in Europe, renewed yen selling emerged after termin showed that
Japan's leading indicator came in at 0.0 in September for the first time
since December 1997, suggesting that the economy could be on the brink of
stalling.
However, the dollar, which remains under pressure from subprime concerns,
only managed to rise to Y114.58 by 0745 GMT from Y115.50 late Monday in New
York, according to EBS.
The euro was up at Y166.36 from Y165.74 and rose to $1.4526 from $1.4471.
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