Monthly Archives: November 2009
Japan Struggles to Maintain Growth
A rapidly appreciating yen, combined with falling domestic prices, may prove to be the one-two punch that K.O.s any chance for Japan’s recovery to continue into the new year. This possibility was highlighted on Friday when the yen rose to a 14-year high against the dollar, even as the latest Consumer Price Index numbers verified that Japan’s domestic prices fell for the eighth straight month Continue reading
3rd Quarter Growth Ends Recession in Canada
As expected, Canada’s third quarter real Gross Domestic Product showed positive growth of 0.1 percent, officially ending the recession in Canada. The volume of imports and exports also increased during the quarter, and the output of services-producing industries increased 0.6 percent. Continue reading
Investors Turning to the Swiss Franc
Investors are turning their attention to the Swiss Franc and are using US dollars to fund the purchases in a new round of carry trades . Switzerland was second only to Australia in dealing with the fall-out of the global recession, and its economy is now forecast to shrink less than half as much as the euro region this year – 1.9 percent compared with 4 percent according to the Organization for Economic Cooperation and Development. “There’s very substantial underlying demand for Swissie, generated by one of the developed world’s largest current- account surpluses,” said Paul Meggyesi, a currency strategist in London at JPMorgan Chase & Co., which turned bullish on the franc Nov. Continue reading
Currency Markets Return to “Normal”!
In the wake of the Dubai debt crisis from last week, the currency markets are attempting to return to normal, whatever that is. While the risk to overall markets have been heightened, there doesn’t seem to be a dominant theme either way. It appears as though we are taking a “breather”– that is a pause before the market decides what it wants to do. Aside from the usual risk taking/ risk aversion trades, there are 2 important pieces of news to be aware of: 1. Canadian dollar (CAD) strength- Canada reported 3rd quarter GDP growth, indicating that they are exiting their recession. Continue reading
Dubai Will Not Cover Dubai World’s Losses
Abu Dhabi – Dubai’s largest stock market – lost a record 8.3 percent after Dubai’s finance minister, Abdulrahman al-Saleh, said that the government will not cover Dubai World’s mounting debts. According to BBC Middle East Reporter Ben Thompson, this statement is somewhat at odds with the commonly-held belief from many who invested in Dubai World, believing that the Dubai government would guarantee them. Continue reading
Yen Update!
Just before I left on Wednesday for Thanksgiving, I noted on blog really quickly that the Japanese yen (JPY) was at a 10-year high to the US dollar. Well that was just the start of it. Let’s take a look at Wednesday’s chart of USD/JPY and a 5-minute chart of this pair when the Dubai news came out. (click charts to enlarge) As you can see from the charts, this pair made a tremendous move in a matter of minutes! Yen strength occurs because of its pecking order in the risk-aversion trade. This weekend will be very important to find out if there is any contagion of this problem in Dubai– meaning if this is an isolated incident or is it going to affect the banks and world markets in general. Stay tuned! Tags: bank , blog , charts , dollar , Dubai , forex , forextrading , Il , Japan , jpy , market , Mike Conlon , minutes , pair , RSI , trade , USD , Yen Continue reading
Canada’s Current Account Gap Grows
Statistics Canada said this morning that Canada’s current account deficit increased in the third quarter to a record high of C$13.12 billion (US$12.44 billion). Both exports and imports increased in the period but imports grew faster, leading to a new high in the deficit in trade in goods at C$3.98 billion. Continue reading
UK to Reveal Recession Worse Than Expected
Chancellor Alistair Darling said yesterday that “new data has shown that most economies, ours included, suffered a severe shock in the first quarter of this year”, leading many analysts to conclude that Darling will downgrade the government’s assessment of the economy’s performance in 2009 in the upcoming pre-Budget report due December 9th. Early indications are that the report will show that the UK economy shrank by 4.75 percent in 2009, compared to the original forecast made last March of 3.5 percent Continue reading
Dubai Debt Panic!
Well, not exactly a “Happy” Thanksgiving. As Americans like myself were stuffing our faces with turkey and stuffing yesterday, news broke of possible debt crisis in Dubai that may become a strain on the banking system. Stock and commodity futures have sold off heavily across the board, with investors fleeing to the safety of the US dollar and the Japanese yen. I’ve written at length about the risk aversion trade and this is a perfect example of it. I wrote as recently as Wednesday that the only way the dollar would strengthen is if therewas a major crisis of confidence in the world economic recovery. This event could be it. There has been a lot of talk about the possible collapse of the commercial real estate market and this possible default in Dubai could signal the start of that market crumbling Continue reading