(As written on The Business Times, 13 May 2013. Click here to read from BTINVEST.)
Over the weekend, G7 finance chiefs and central bankers reaffirmed their February commitment to “not target exchange rates”. That statement seems to indicate that they will tolerate a weakening yen for now as they stepped up their focus on Japan’s recovery strategy.
According to economists surveyed by Bloomberg News, much of the data scheduled for release this week will show that the euro area remained in recession in the first quarter of 2013 and that US retail sales fell in April for a second consecutive month. This probably explains why the finance chiefs are accommodative of loose monetary policies.
Bank of Japan Governor Haruhiko Kuroda used the G-7 talks to reiterate that his doubling of monthly bond purchases is aimed at meeting a 2 percent inflation target by 2015, and not at artificially helping exporters. While the yen’s weakness aids local exporters such as Sony Corp., it risks undermining the prospects of trade partners. Nations including Australia, New Zealand and Switzerland are also moving to counter climbing currencies.
(As written on The Business Times, 6 May 2013. Click here to read from BTINVEST.)
Last Friday, The US Labour Statistics Department announced that American employers took on more workers than forecasted in April. Payrolls expanded by 165,000 following a revised 138,000 increase in March that was larger than first estimated. Revisions added a total of 114,000 jobs to the counts for February and March.
Interestingly, the jobless rate unexpectedly fell to a four-year low of 7.5 percent, reflecting confidence in the outlook for the world’s biggest economy. The jobless rate dropped from 7.6 percent in March, indicating that most of the 210,000 new entrants to the labour force found employment. The rate, which is derived from a separate poll of households, was forecast to be unchanged, according to the Bloomberg survey median. The employment report also showed average hourly earnings rose 1.9 percent from a year earlier to USD23.87.
Immediately after the announcement, the US dollar rallied, sending the USD/JPY up over a hundred pips in one hour and touching a weekly high of 99.26. Stocks also rallied, sending the Dow Jones Industrial Average briefly above 15,000 for the first time, as the report bolstered expectations that the almost four-year economic expansion will overcome a second-quarter slowdown.
(As written on The Business Times, 29 April 2013. Click here to read from BTINVEST.)
China and most of Asian stocks fell last week after the release of unexpected slowdown on China’s manufacturing benchmark. The HSBC Flash Manufacturing PMI for the previous month came in at 50.5 when most had forecasted at 51.4.
This unexpected slowdown has reignited worries on the continuity of China’s economic recovery. “Investors are worried about whether the recovery of the Chinese economy will continue,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd. in Hong Kong. “If you look at the number, it’s still above 50, so it’s not bad. But market sentiment remains cautious because there are still prevailing uncertainties like bird flu and the earthquake in Sichuan.”
Recent China data releases is not reflecting a sustained period of recovery, which is causing a bit of concern as it is also a reflection of weaker global growth. China’s industrial growth is facing downward pressure amid slowing domestic and international demand, causing many analysts to assess the Chinese economic data to continue weakening into the second quarter.
(As written on The Business Times, 22 April 2013. Click here to read from BTINVEST.)
In a high level meeting last week in Washington, the G20 finance chiefs pledged to stay alert to any fallout from easy monetary policies even as they backed the Bank of Japan’s plan to buy more than 7 trillion yen (USD70 billion) a month in bonds.
Bank of Japan (BoJ) governor Haruhiko Kuroda was encouraged by the show of support as he presses ahead with his campaign to defeat 15 years of deflation. “Winning international understanding gives me more confidence to conduct monetary policy appropriately,” Kuroda told reporters after the meeting. “We will continue our qualitative and quantitative easing for the next two years.”
On Monday’s opening, Japanese equities jumped the most in a week while gold advanced for a fifth day. The yen came within a few pips of breaking the 100 barrier, the weakest level in 4 years. The Nikkei 225 rose 1.9 percent as the yen slide buoyed shares of exporters.