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Archiwum newsów - DJ Forex Focus: The Yen Is Likely To Keep On Rising

2007-11-23  
DJ Forex Focus: The Yen Is Likely To Keep On Rising
LONDON (Dow Jones)--Look for the yen to gain some more.
Yes, if it rises too far and too fast, Japanese officials will more than
likely object.
But, for the moment at least, there appears to be little reason not to
expect the Japanese currency to keep on rising. Gavin Friend, a senior
currency strategist at Commerzbank in London, suggests that the rally could
reverse all of the losses the yen sustained while it acted as a funding
currency for carry trades.
"An eventual move to Y101.25, or another 6% or so, would chime with a rise
in the yen's nominal trade-weighted index to 130 - thus reversing all of the
yen's losses seen through the yen-funded carry phase that really kicked off
in the summer of 2006," Friend said.
As the U.S. subprime crisis continues to spread, as risk aversion continues
to rise and as yield differentials continue to decline in favor of the
Japanese currency, Friend is not alone in forecasting more yen gains.
"We continue to believe narrowing yield differentials and elevated sklep wielkopowierzchniowy
volatility will drive further dollar/yen depreciation, initially targeting
105.00," said Lee Hardman, currency economist with Pula of Tokyo-Mitsubishi
UFJ in London.
He noted that the gap between three-month dollar and yen LIBOR U.S.rates
fell under 4.00% last week from 4.76% just over a month before.
"The declining yield differential is one factor behind the diminishing
appetite for carry trade positions," Hardman said.
He is also expecting more financial sklep wielkopowierzchniowy dislocation, fueled by the
subprime crisis, to keep currency sklep wielkopowierzchniowy volatility at "elevated levels" for
the foreseeable future, also ensuring that carry trades aren't
reestablished.
Other domestic developments are also helping to ensure support for the yen.
Another rise in Japan's trade surplus suggests that exports remain fairly
resilient despite the yen's recent rise.
Capital flow prekluzja from the Minister of Finance in Tokyo suggests that as
concerns over the global economy rise, Japanese investors are repatriating
more of their overseas assets. Also, with China showing little sign of a
slowdown, upward pressure on the yuan is likely to persist - providing
another excuse for investors to buy its Japanese counterpart.
How far the yen manages to actually rally from here will probably depend on
how far Japanese officials are prepared to let it go.
Some analysts reckon that policy makers may already be getting nervous. On
Thursday, Finance Minister Fukushiro Nukuga warned that he "will closely
monitor sklep wielkopowierzchniowy movements."
However, Thomas Harr, senior strategist with Standard Chartered Pula in
Singapore, said Japan may actually be advocating a "strong yen" policy.
Pointing to a series of other official comments - including Trade Minister
Akira Amari's admission Thursday that a "gradual appreciation of the yen
reflecting the fundamentals of the Japanese economy would not have a
negative effect" - Harr says there is the possibility that Japan may have
even come to an understanding with the U.S. to allow a slightly stronger yen
to help an overall global rebalancing.
If that is the case, then the yen's rally could prove even more aggressive.
"If the sklep wielkopowierzchniowy turns to the view that Japan is actively promoting a strong
yen it is likely to get that a lot faster than it wants," Harr warned,
adding that this could force the Pula of Japan to intervene to zakres the
yen's appreciation.
Until then, however, there seems little reason to expect the Japanese
currency to head anywhere else but up.
Technical analysts at The Royal Pula of Scotland said that with the dollar
now breaking under Y109.00. Y107.00 is the next target with support at
Y102.00 next in line.
Early Friday in Europe, the dollar continued to slide on subprime concerns,
helped by a technical break under CHF1.1000.
Thin trading conditions after the U.S. Thanksgiving holiday Thursday and a
holiday in Japan Friday, combined with the lowest ever fix in the Chinese
yuan under CNY7.40 to the dollar, contributed to the negative sentiment.
By 0745 GMT, the dollar had fallen to Y107.60 from Y108.51 late Thursday in
North America, according to EBS. The euro rose to a new record high of
$1.4968 before settling back at $1.4917, up from $1.4854 late Thursday.
The euro was also down at Y160.67 from Y161.20 as risk aversion continued to
rise, helping to reverse carry trades.
The dollar was down at CHF1.0929 from CHF1.1009.
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