Forex Blog

May 9, 2012

Euro Price Action Increasingly Bearish But Yet to Close Below Key Barrier

Filed under: Forex News — Tags: , , , , , , , , , , — admin @ 7:16 am

By Joel Kruger, Technical Strategist for DailyFX.com

  • Greece political uncertainty fuels fears of contagion
  • Euro under pressure but yet to close below 1.3000
  • Commodity bloc and emerging market FX most exposed

The ongoing political turmoil in Europe continues to shake the markets, with the inability for Greece to form a government now fueling speculation that the country might soon exit the Eurozone. Although an exit by Greece would have only a minimal impact on the broader economy, given the country’s size, fears of contagion seem to be the bigger problem right now, as investors start to price in the impact this will have on larger economies like Spain and Italy.

Technically, we have said that a close below 1.3000 would be a very bearish development for the Euro, as we have not seen a daily close below 1.3000 since January. With this in mind, Euro bulls can still hold onto some hope at this point, as the market has yet to officially put in a daily close below 1.3000. As such, we continue to recommend proceeding with caution at current levels, and only recommend looking to get more aggressively bearish the Euro on a daily close below 1.3000. A daily close below 1.3000 should then open the door for acceleration back towards the 2012 lows from January at 1.2625.

Despite the fact that all of the problems right now are Euro-centric, the Euro is still not the weakest currency in the current market environment, as the higher yielding risk correlated markets get hit even harder. We have been seeing some underperformance namely on the commodity bloc and emerging market FX, and should investors continue to look to flee to safety, we project that these markets will continue to underperform. As such, look for more weakness from currencies like Aussie, Kiwi and Cad, and from the more exotic markets like the Mexican Peso, South African Rand and Turkish Lira.

Greek Exit Fears Are Growing

Filed under: OANDA News — Tags: , , , , , , , , , , , — admin @ 6:04 am

The weekend’s inconclusive elections in Greece were seen by many as an indication of a rising risk that Greece may exit the euro zone.

The New Democracy won the elections with 19 percent of the vote, gaining 108 seats; Syriza was second with 17 percent, winning 52 seats; and Pasok came third with 13 percent, or 41 seats.
The elections results have raised European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010, when the European authorities demanded Greece’s government to implement 11.5 billion euros budget cuts.

Alexis Tsipras of Greece’s Syriza announced that he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to inform the EU leaders about revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. Tsipras handed in this ultimatum to renounce support for the EU’s rescue terms as a condition for the political leaders to enter government. Tsipras told reporters that “there will be no 11 billion euros of additional austerity measures; 150,000 jobs will not be cut.” Samaras and Venizelos rejected his request.

Some analysts said, it is possible that Greek political turmoil could result in a new government that actively renounces the bailout—leaving Greece without its rescue aid. If official funding from the International Monetary Fund (IMF) and the rest of Europe were cut off, the Greek government would have no new sources for cash. It could try to stretch out payments to suppliers and government workers and live off its remaining funds for some time. If there would be no spending cuts, the only alternative left to the government would be to print the country’s own currency to pay for government services.

An exit from the currency would throw into doubt contracts denominated in euros, with consequences for the real economy, not just the financial sector. In absence of assurance that a euro payment will actually be made in euros, companies might be less willing to conduct business or trade with vulnerable member states. Investors would start looking at other countries in an environment, where there is already a weakness of natural demand for Spanish and Italian government bonds, particularly among foreign investors.

The bailout has left the governments of Europe, the European Central Bank and the IMF as Greece’s main creditors. While the international creditors urged Greek leaders to hold to the agreed terms of their EU-IMF bailouts, letting Greece exit euro zone would mean significant losses for them. The two-year-old bailout program and the massive debt restructuring earlier this year have helped insulate Europe’s banking system and private sector from Greek troubles.

In the weekend, Tsipras’s party, Syriza, won just 52 of the 300 seats in parliament, and many economists said that the chances it could have to form a governing coalition appeared slim. If Greece is unable to form a government, it faces another election in June and will be on a collision course with its creditors.

Sources: Wall Street Journal and Bloomberg

EUR: No bounce, No Lift, No Life

Filed under: OANDA News — Tags: , , , , , , , , — admin @ 4:21 am

Markets fear the unknown and with Greece we seem to be on the periphery of a black hole. Contagion fears are back in full force, not that they ever left. With Greece edging towards that EUR exit, pressure is beginning to build in all the right or wrong places. Yields on Portuguese sovereign debt is climbing faster than that of its Greek counterpart. Spanish and Italian borrowing costs are backing up. Global markets are pointing to another imminent Euro crisis, again, with “Greece at the epicenter.”

The anti-austerity rhetoric from that country appears to have intensified in the O/N session. This can only increase the possibility of another general election taking place next month, while the prospects of Greece ever exiting the EU just got that bit more likely. Why? There is a considerable risk that a left leaning coalition would be formed at the next general election with a more explicit mandate to reject the EU and IMF program. Obviously under this scenario, Greece’s continued membership would be put in question.

Market fear is not the political rhetoric, nor the rise of the lefts anti-austerity feelings, it’s the fear of what would unfold if Greece were to physically leave and lapse its Euro membership. Despite believing that a Greek exit would be probably less damaging that say it occurring a year ago, mostly due to the EU firewall building campaign, the question is not about Greece itself. It’s about whether a Greek exit “exacerbates pressure on other countries to do the same.” If so, the stability of the Euro-zone banking sector will be called further into question. How strong is that firewall? It’s now that we are getting a sense of urgency. Only last night, the Spanish government plans to require its banks to set aside between +EUR20b and +EUR40b in additional provisions as part as an effort to overhaul the country’s financial woes.

Currently, spot exchange seems to have no bounce, no lift, no life. Greek woes are keeping the EUR offered outright. Even the EUR crosses are lending a hand. Technically, there are offers into the 1.30 expiry that are slowing any drift higher and keeping the stop-losses in that handle intact for now. The rumors of Middle-east offers are helping to cap any upward general movement. On the downside, support reappears at 1.2960-50, where barrier expires are due to run off today. With this out of the way, any break of the 1.2950 level could accelerate selling allowing the single unit to further drift into the low 1.29’s.

There seems to be a change in trader sentiment and attitude towards the EUR to when we last visited this region maybe five month-ago. Many more are talking about barriers and options supporting the currency, that includes corporate demand and repatriation flows. This time around there seems to be an equal amount of bottom “feeders” and top “pickers.” Looking at the position diagram below, the percentage of shorts have reduced day over day.

Position May 9

Yesterday, close to these levels, the market was 54% short the single currency. Today, that total is 48.5%. Why? Some individuals simply believe that this currency is better supported than before. In this scenario, there is no real saturation of shorts to limit the EUR’s downside. One can expect the bottom pickers stops to be eventually triggered, adding fuel to the EUR’s existence debate.

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April 27, 2012

BoJ Provides No Favors

Filed under: OANDA News — Tags: , , , , , , , , , , — admin @ 11:13 am

The BoJ has disappointed the market expectations for aggressive easing. Despite announcing a +JPY10t increase in its JGB purchase program, an offsetting reduction in the target for fixed-rate loans to banks, saw a net increase in the APP in line with expectations. More importantly, Governor Shirakawa did not stop there; he and fellow policy makers have indicated that the new current measures should be sufficient to meet the inflation objective of +1%. It is this rhetoric that has diminished somewhat market expectations that Japanese policy makers had embarked on a series of APP increases and large-scale QE action. Are the BoJ taking the foot off the gas too soon? Already stating that they have no intention of increasing stimulus each month, coupled with the absence of US yields moving higher, will probably equate to a rather limited USDJPY strong play.

Below are some other highlights of the week:


Asia

  • CNY: Chinese HSBC Flash PMI rose slightly to 49.1 this month from 48.3 in March, but was still below the 50 mark for expansion. Are we seeing the trough for growth in China being made?
  • EU: Results from last weekend’s G20/IMF and World Bank meet saw the G20 pledged $430b to boost the IMF funds. The US declined to contribute while Canada proposed making it harder for Europe to tap aid.
  • SGD: Singapore CPI inflation accelerated to +5.2%, y/y, in March from +4.6%, y/y, in February, mostly on the back of higher transport prices. The market is betting that this should keep the MAS on its tightening stance.
  • AUD: Aussie PPI unexpectedly fell -0.3%, q/q in Q1, decelerating from a +0.3% rise in Q4 2011.
  • AUD: The Aussie rates market has raised its pricing for RBA rate cuts by +7bp to +32bp for next week’s meeting after the country’s inflation data. Australia’s headline CPI rose +0.1%, q/q, in Q1 after a flat Q4, much weaker than the consensus forecast for +0.6%. The core or underlying inflation came in well below the +0.6%, q/q, consensus at +0.35%.
  • JPY: Japan’s corporate service price index fell -0.3%, y/y, last month following a -0.6% decline in February.
  • NZD: The Kiwi’s posted a small monthly migration gain of +130 (sa) in March, after a revised net loss of 300 in February.
  • INR: S&P shifted the outlook on India’s BBB- ratings to ‘negative.’ In plain language, the country could drop out of investment grade. S&P focused on India’s widening current account deficit and Governments difficulties in implementing policy measures.
  • KRW: Korea’s consumer confidence rose to its highest level in 12-months to 104 this month from 101 in March.
  • NZD: The RBNZ kept the policy rate unchanged this week, but signaled a dovish shift in response to the NZD strength. Previously Bollard stated that sustained currency strength “reduced the need for future increases in the OCR”. This week their stance has become a tad firmer, stating that “should the exchange rate remain strong without anything else changing, the Bank would need to reassess the outlook for monetary policy settings”. Is this opening the possibility for even cutting rates should the Kiwi strength continue?
  • AUD: Aussie Conference Board Leading Index was unchanged in February, following a revised +1% increase in the previous month.
  • KRW: Korea’s GDP rose +2.8%, y/y in Q1, below the consensus forecast for +3.0% print. Analysts note that net exports were down about -5%, q/q, in Q1 suggesting external demand is lagging.
  • JPY: The BoJ has disappointed the market for aggressive easing. While the central bank announced a +JPY10t increase in its JGB purchase program, there was an offsetting –JPY5t reduction in the target for fixed-rate loans to banks. As such, the net increase in the APP just +Y5t, in line with expectations.
  • JPY: Japan IP rose less than forecasted in March, gaining +1%, m/m, after a +1.6% decline in February. Core-CPI rose +0.5%, y/y in March, following a +0.3% increase in February.
  • JPY: Retail sales climbed +10.3%, y/y, in March after a revised +3.4% increase in February, while household spending rose +3.4% accelerating from a +2.3% from the previous month.
  • JPY: Japanese jobless rate was +4.5% last month, unchanged from February.
  • CNY: China’s industrial profits rose +4.5%, y/y, in March, rebounding from the first January-February decline in three-years.
  • KRW: Korea’s current account surplus rose to +$3b in March from +$0.5b in February, supported by a recovery in the goods trade balance.

Spanish Downgrade and Bank of Japan Action Inspire Fresh Volatility

Filed under: Forex News — Tags: , , , , , , , , , , , — admin @ 7:16 am

By Joel Kruger, Technical Strategist for DailyFX.com

  • S&P downgrades Spain two notches to BBB
  • PM Rajoy comments contribute to risk off price action
  • Yen sees whipsaw price action post new BOJ measures
  • SNB back in focus; keeping an eye on EUR/CHF

Risk correlated assets have come under pressure into Friday trade following the news of the latest S&P downgrade of Spain’s credit rating by two notches to BBB. Comments from Spanish PM Rajoy that the country’s ability to fund itself isat risk and that budget cuts are necessary due to an unmanageable deficit, also have not helped matters. As a result, the Euro has come under some added pressure, with the single currency trading back below 1.3200.

Elsewhere, the Yen was subjected to some highly choppy whipsaw trade after the Bank of Japan announced additional monetary easing measures. Although the BOJ left rates on hold as expected, the Yen was sold off after the asset purchase fund was raised by Y10 trillion (net Y5 trillion as Y5 trillion fixed rate operation was reduced), and the maturity of the purchasing JGBs was extended to 3 years.

However, any initial Yen weakness on the announcement was easily absorbed, with USD/JPY more than giving back its post event risk rally. The broader macro theme of risk off trade proved to be the more influential market mover and perhaps sent a message that government action can not have any lasting influence on currency direction.

This offers a good segue into the subject of Swiss intervention, and we would remind investors to not forget about the EUR/CHF cross rate, which has been unable to establish any upside momentum beyond 1.2000, despite firm warnings from the SNB that the 1.2000 floor will be aggressively defended. The recent Yen rally post BOJ moves can not be comforting to the SNB, and just might provide enough ammunition for Swiss longs to ramp up their efforts. While we are not necessarily calling a EUR/CHF 1.2000 break today, we also will be keeping a close eye.

Overall, we would still recommend trading with extreme caution in these very tight directionless markets. Despite the Euro pullback, the market still seems to be very well supported on dips, and we would still not rule out the possibility for a reversal back above 1.3200 and towards 1.3300. We are very bearish once 1.3300 is tested, but at current levels, we remain sidelined. Ultimately, it will be attitude towards risk that determines market direction. Any pick up in risk appetite will be Euro and currency positive (USD and potentially Yen negative), while added fear and uncertainty will likely weigh on the FX markets and benefit the US Dollar.

EUR Requires Conviction

Filed under: OANDA News — Tags: , , , , , , , , , , , , , , — admin @ 4:37 am

This EUR market is having a difficult time deciding what it wants to do in the short term as it gyrates around familiar prices levels. The initial reaction to the two notch Spanish downgrade by S&P was itself rather muted. The cut certainly was not a surprise, however, the timing was a bit unexpected and not a helping hand for the Italians who are paying a hefty premium to shift their own debt. While the Spanish out look is “negative” the country does remain three notches above “junk” status. Thus far, the single currency has avoided recording any dramatic losses and should probably be thanking the German bunds safe-haven status from preventing bigger losses.

The markets main focus this morning has been on Italian 10-year borrowing costs and investors appetite for periphery product. Last evening’s Spanish downgrade was horrible timing for today’s sale. Pre-sale, Italian benchmark yields climbed to +5.84%, 60bp above a comparable bond sale in March. Persistent high yields will only add to markets’ concerns about the debt of weaker EZ countries. Despite this, the Italians did sell +5.95b euros bonds, near the top of a planned issue range of between +3.75b and +6.25b euros. It seems the immediate market reaction is one of relief, the EUR has managed to tick higher, Euro and periphery spreads are falling and even the dollar and cross yen currency pairs are rallying, confirming that some of the earlier Yen strength was on a safety bid.

By the law of percentages this market pessimism is unlikely to last. Market twitching between risk-on and off is not good for the heart or mind. Upbeat data could confirm a soft landing in China soon, US growth should remain comfortably above trend for this year, even technical positions are beginning to be supportive of riskier bets and risky assets such as the emerging markets, who are beginning to look cheap especially if an easing ECB policy prevails. The market has yet to decide the lead funding currency. Maybe the JPY? The BoJ seems willing to step up QE unlike the Fed.

JPY did happen to sell off after the expected BoJ announcement earlier this morning, however so far, its move remains rather muted. It was not a surprise to see the BoJ expand its asset purchase program (APP) by +JPY5t to +JPY70t and doing this by:

  • Increasing JGB buying by +JPY10t
  • Increasing equity index ETF’s by +JPY200b
  • Increasing J-REIT by +JPY10b and
  • Decreasing fund supply operations by -JPY5t to +JPY30t.

Spain’s Unemployment Hits a New Record

Filed under: OANDA News — Tags: , , , , , , , , , , , , , , — admin @ 3:27 am

Spanish unemployment has hit a new record high. According to the national statistics agency, the unemployment rate reached 24.4 percent at the end of March, with a record 5.64 million people being unemployed. Just in the first three months of the year, 365,900 people lost their jobs in Spain.

Spain has the highest unemployment rate in the European Union and it is expected to rise further this year. Other figures released today showed that Spanish retail sales were down 3.7 percent in March from the same point a year ago, the 21st month in row sales have fallen.

The Bank of Spain said earlier this week that the country’s economy contracted by 0.4 percent in first three months of this year, after shrinking by 0.3 percent in the final quarter of last year. Official GDP figures to be released on Monday are expected to confirm that Spain has fallen back into recession.

Yesterday, the ratings agency Standard & Poor’s (S&P) cut Spain’s rating by two notches to BBB+, warning that the country might have to take on more debt to support its banking sector. S&P predicts the Spanish economy will shrink by 1.5 percent this year, having previously forecast 0.3 percent growth.

Source: BBC

April 20, 2012

FED not Associated with Divergence

Filed under: OANDA News — Tags: , , , , , , , , , , , , — admin @ 11:07 am

The Fed takes center stage next week. Does the retail sales print this week finally put a nail into Q3’s coffin? Bernanke’s colleague, north of the 49th, at the BoC, is itching to pull the rate trigger. This week, policy signals and tone from various G10 members has changed. With hawkish or more accurately ‘less dovish’ policy tones from the BoE, BoC and Swedish Riksbank has fixed income traders reducing expectations for further easing. In Canada’s case, it’s all about tightening. It was only a few month ago that all Central Bankers were waving the same flag, now we have policy divergence. FX traders have only just got their heads around Euro-periphery yields, now they will have to widen that scope. With respect to the Fed, they remain a non-starter, but have a lot to say.

Below are some other highlights of the week:


AMERICAS

  • USD: US Retail Sales rose by a +0.8% last month, and for the third month retail ex-food and energy showed solid growth, +0.8%. March’s gain is two times larger than expected after the +1% February gain. With the US economy not slowing, but picking up pace, this is proof that consumers are back in a “big way”, and with the Fed meeting next week, is it the final nail in the coffin for QE3 arguments?
  • CAD: Non-residents have flocked back again to Canadian markets after a one month sell off. Foreigners have resumed their purchases of Canadian securities in February with the biggest monthly bond activity in two-years. Investors bought +C$12.5b worth of Canadian securities after a –C$4.25b prior month sell off. All of this is mostly down to the country’s AAA credit rating. It’s no wonder that the loonie has been in demand.
  • USD: February US TIC data showed that there was a net LT purchases of $10.1b. China increased their holdings, picking up +$12.7b for a net holdings of +$1,178.9b and maintains their number one spot for holding US debt.
  • USD: The Empire State Manufacturing Survey saw its headline index plunge to a new five month low, falling from 20.21 in March to 6.56 in April. There were some positives, the workweek rose, as did the employment index, rising to a new 11-month high. The negatives were the forward looking index slipping as well as the future activity index.
  • USD: US business inventories rose in line with expectations. Inventories increased by +0.6% in February, to a seasonally adjusted +$1.578t. The recent stockpiling has largely been driven by companies trying to keep with consumer demand as consumers continue to spend, look at this week’s strong retail sales.
  • USD: The NAHB Housing market index dropped from 28 to 25 this month. The decline equals January’s print and marks the index’s first slip in seven months.
  • CAD: Factory sales fell as expected in February, led by declines in the autos sector. Manufacturing declined -0.3% to +C$49.12b, following a sharp drop the previous month. The data was skewed by weak factory shipments from “vehicles and auto-parts.”
  • USD: US Industrial production remained flat for a second consecutive month in February and no revisions for the prior month. Another indicator for industrial slowdown was US capacity utilization softening to +78.6% from +78.7%. The market had been looking for a rise in both indicators to +0.2% and +78.6% respectively.
  • USD: US home building declined last month (-5.8% to +654k), but, new permits reached their highest level in four-years (+4.5% to +747k), proof perhaps that the sector continues to struggle even as builders anticipate future demand.
  • CAD: BoC Governor Carney did what was expected of him and kept rates on hold this week. However, his tone was more hawkish, influencing FI dealers to re-price their yield curve believing that the BoC could raise rates as early as January 2013 or sooner. The Bank is clearly uncomfortable with keeping interest rates below inflation when household debt continues to grind higher, and with the economy poised to reach capacity by early next year.
  • IMF: Boosted their economic growth forecast to +3.5% from 3.3% for this year.
  • CAD: The BoC Monetary Policy report reiterated the hawkish sentiment already expressed by Governor Carney after he left o/n rates on hold earlier in the week. The BoC increased its forecast for growth in the first three quarters for 2012. Q1 to Q3, growth is now pegged at +2.5% vs. +1.8% in December. Q3 is expected to rise to +2.4% from a previous estimate of +2.1%. The already high ratio of household debt to income is also expected to rise further.
  • USD: The weekly EIA report showed that crude inventories rallied again to a double of estimates, +3.9m vs. +1.5m barrel.
  • USD: Initial jobless claims disappointed last week, easing -2k to +386k with an upward revision to the prior week +8k. The market had expected to drop to +370k. The trend is disturbing, especially with prior week’s constantly get revised higher. Big picture, in election year, the job landscape does not seem to be improving fast enough for Obama. The Fed will have to keep the potential of using QE3 on the table to support the economy. Bernanke will surely be questioned on this next week.
  • USD: Existing home sales dropped -2.6% to +4.48m last month. Market had been expecting a stronger print of around +4.62m. It’s worth noting that distressed sales fell to +29% from +34% of the total, implying that non-distressed sales were up on the month. It’s a small win along with the mention that a lack of inventory in some markets has appeared.
  • FED: The Philly Fed Business outlook saw a slip in the headline of -4pts to +8.5 for this month, suggesting that slower manufacturing expansion is occurring in that region.
  • USD: The Conference Board’s Leading Economic Indicators index rallied by +0.3% last month. Digging deeper, the coincident index rose +0.2%, while the lagging index was up +0.3%.
  • CAD: Annual inflation eased considerably in March, falling below the +2% mark for the first time in 18-months (+1.9%), on the back of slower price increases in gas and electricity. The result has plummeted from February’s print of +2.6%. It was a similar store for the ‘core’, falling to +1.9% from +2.3%. On a m/m basis, CPI climbed +0.4%, while the core rose +0.3%
  • G20, IMF and World Bank meet in Washington this weekend.

EUR Rallies ‘Cause it Can

Filed under: OANDA News — Tags: , , , , , , , , , , — admin @ 4:33 am

The pattern remains the same in the overnight session, another contained EUR trading range. However, if a currency is unwilling to head south, then there is a threat that it will want to trade at higher prices. This will certainly be testing the stamina of the weaker bear positions. Blinkered focus this week has been on Spanish refunding needs. A successful auction came and passed and still Italian and Spanish government prices continue to fall this morning. It seems they have failed to inspire renewed confidence in peripheral markets.

German Bunds yields are printing record low yields for a second consecutive day as investors maintain their appetite for safe haven assets. Spain is toying again with that psychological +6% yield, while French yields continue to build ahead of the first round of the country’s Presidential race this weekend. Uncertainty created by the first round of voting could push that country’s spreads even wider. The market remains concerned, and rightly so, about Spanish banks and their non-performing loans. The firepower, albeit waning, of the ECB’s LTRO doe not seem to be fooling anyone.

The single unit continues to test overall market patience. The currency has rallied this morning on the back of a stronger German ifo release. In a contained range, the definition of a rally seems to be as little as ten points, where is the volatility? German business confidence has again unexpectedly increased for a sixth straight month, with companies encouraged by signs that the Euro-zone’s largest economy is rebounding from the bloc’s slowdown. The index rose to 109.9 as manufactures regarded economic outlook “significantly more positive.”

This week the EUR has weathered softer US data, higher peripheral yields, the IMF spinning Spanish outlook and local “ring fencing” to little effect and not so positive rhetoric from ECB’s Praet with his comments on how many years its will take the region to overcome this crisis. However, expect option market rhetoric to try to apply some pressure on the unit as large expiries come due at 1.30 and 1.31 later this morning along with a 1.2950 barrier rolloff. The technicals have not changed so much, demand remains on dips, with the 21-day MA remaining in focus (1.2992). Selling failure remains an objective, there are offers front running Middle east interest ahead of the figure and with some stops just above. With market momentum remaining slow, the safe bet is for another consolidated daily range.

The significant surprise this morning was UK sales data. Last months print came in at a very strong +1.8% gain, ex-food and energy the headline revealed a firm +1.5% print. This certainly has given Sterling the upper hand against most of its trading partners. Bigger picture, if the BoE minutes this week were unable to convince you that QE is now likely for an extended pause, then this morning’s print will help persuade the market that UK policy makers are very much in a “holding pattern” on QE. Next week the Fed is up, and with the softer data of late, QE will be a question posed to Bernanke and company. For the BoE, no further evidence of downside risk to growth and with risks to inflation now appearing, there is no need for them to pull a QE trigger just yet. Now, with Bernanke and employment, it is very much another matter!

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April 19, 2012

Japanese Exports Rise on Autos

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 7:00 am

Japan’s exports rose in March, boosted by a surge in shipments of cars as the sector continues to recover from last year’s natural disasters.

Car exports rose 33.6% from a year earlier, with overall exports up by 5.9%, latest trade data showed.

Japanese carmakers have also benefited from growing demand from key markets such as the US.

Sales of cars and light trucks in the US rose 13% in March, with Toyota’s sales up by 15% and Nissan gaining 13%.

Ryoji Musha of Musha Research told the BBC that the “improvement of exports indicates that the Japanese and the global economy are recovering”.

Mr Musha added that the recent weakness of the Japanese yen had also played a part in boosting exports.

The currency fell more than 8% against the US dollar between February and March this year, making Japanese goods more affordable to foreign buyers.
Growing imports

Japanese imports rose by 10.5% in March, resulting in a trade deficit of 82.6bn yen ($1bn; £632m) during the month.

The jump was driven largely by a 21.8% increase in imports of liquefied natural gas (LNG).

Japan has seen imports of LNG and other fuels rise in recent months.

Last year it shut down almost all of its nuclear power stations in the wake of radiation leaks at the Fukushima Daiichi nuclear plant after the earthquake and tsunami.

As a result the country’s electricity providers have been relying more heavily on thermal power plants, which require coal, oil and LNG to operate.

Analysts said that growing imports of fuel are likely to affect Japan’s trade numbers in the coming months.

“Exports to the United States such as autos are unlikely to keep growing, while the levels of imports will remain high, driven by purchases of natural resources,” said Hideo Shimamine, chief economist at Daiichi Life Research Institute.

“It looks like we will be having trade deficits for the time being.”

BBC Business

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