Market News

The Japanese Yen surged broadly in Asian trading today following the news that Chinese authorities ordered the implementation of recently established capital reserve requirements for some Chinese banks, an indication that China is making some effort to control its booming economy and stave off inflation. Not all Chinese banks were required to raise their reserve; the specifically chosen banks all bore the same characteristic excessive lending policies.

The JPY and USD decreased on Monday while the EUR and other igh-yielding currencies increased, both results of reports that Ben Bernanke was close to being confirmed for a second term as chairman of the Federal Reserve.

In Asian trading today, the U.S. Dollar edged up versus the Japanese Yen after the release of the news by a White House representative that Ben Bernanke, the Chairman of the U.S. Federal Reserve Banking system, is set for reappointment to a second term of office.

Next week trader's attention will be focused on Ben Bernanke's confirmation, US GDP, and the FOMC. If Ben is unable to get confirmed for another term as Chairman of the Federal Reserve Board, I expect the news to be dollar bearish. Primarily because of the uncertainty that would ensue from such a result. Coupled with Obama's new bank regulation proposals, and a floundering economic recovery, the US dollar will give back some of the gains. The US GDP is expected to have grown by 4.5% last quarter, this may seem a bit optimistic but retail sales did increase in the last three months, and the trade deficit declined.

The Japanese Yen rose to a new 9-month peak against the Euro, which continues to struggle on investor concerns over the fiscal health of many of the Euro-zone nations. As reported at 12:04 p.m. (JST) in Tokyo, the Euro traded at 127.26 Yen, a decline of .1%, though at one point it had traded at 126.55 Yen, the lowest price since April 2009. The Japanese Yen also moved up versus the U.S. Dollar, trading at a 5-week high of 89.85 Yen.

The U.S. Dollar touched a new 5-month peak versus the single currency Euro in London trading today as continued investor concerns over the debt problems in Greece and other Euro-zone countries weighed heavily on the currency. The fiscal well-being of some European countries, e.g. Spain, Greece and Portugal, spurred investors to sell off their Euro-zone government bonds in favor of German-issued paper.

The dollar has strengthened across the board in volatility trading over the last few days. Clearly the dollar bulls are in control of the market now. The EUR/CHF is effectively unchanged from where North America closed out Wednesday. Talk of buy orders down at 1.4700/10. I believe that there will be some intervention if it falls below 1.4700.

The U.S. Dollar rose broadly in early London trading today, helped by a drop in commodity-linked currencies on the rumor that lending institutions in China may have been advised to curb their lending activities, which would effectively slow the fast pace of the Chinese economic recovery.

The EUR hit a four month low after a sharp decrease coming as a result of concern over Greece's fiscal problems. The fall also occurred in response to the currency falling below a key chart level that might signal a bearish trend.

The Pound Sterling touched on a new 6-week peak versus the U.S. Dollar and a 4-month peak against the single currency Euro in Asian trading today. As reported at 1:49 p.m. (JST) in Tokyo, against the U.S. Dollar the British Pound traded at a new high of $1.6422, and versus the Euro, the Pound edged up .5% to trade at 87.67 Pence. The U.K. currency benefited from the recent news that British-based Cadbury Plc and U.S.-based Kraft Foods intend to create the largest confectionary firm in the world; to that end, a $19 billion deal is currently under negotiation.

All of the major currency pairs (except for the GBP/USD) traded in a 30 pip range during the Asian Session. The GBP/USD strengthened on possible M&A flows from a Kraft takeover of Cradbury.

In light Asian trading today, the U.S. Dollar and Japanese Yen both gave up last week’s gains to higher yielding currencies. As reported at 4:04 p.m. (JST) in Tokyo, versus the Australian Dollar, the U.S. Dollar slipped to $0.9234, a decline of .1%; versus the single currency Euro, the greenback held steady at $1.4380, though at one point in the trading session it had been up nearly .2%.

Continuing investor concerns about the Greek economy and mounting debt has precipitated the single currency Euro’s fall versus the Japanese Yen and the U.S. Dollar. In Asian trading today, as reported at 1:50 pm (JST) in Tokyo, the Euro slipped to $1.4416 from yesterday’s late New York trade of $1.4504; versus the Japanese Yen, the Euro declined from 131.93 Yen on Thursday to 131.32 Yen.

Positive economic news continues to help boost the Australian Dollar in Asian trading, encouraging investors to take on riskier, higher yielding currencies. Data released yesterday by the Australian government showed that employment figures increased for the 4th straight month last month, and the unemployment rate dropped to its lowest level in 8 months, all of which points to the strong likelihood of another rate increase.

Stronger employment data from Australia beat market expectations, resulting in the AUD/USD spiking to .9293 on the news. With a stronger economic report released, I believe that the AUD/USD will reach .9350 by the end of the week as traders become more confident that the Australian RBA will raise rates in February. The EUR/CHF steadily appreciated over the course of the past session, with some strong bids to the start of the European session.