Similar to the euro, the British pound will likely weaken against the US dollar amid risk aversion in the first half of the year. Against the euro, the pound had gained for 3 consecutive years since 2009 although the magnitude has been declining. In 2011, EURGBP has been on a down trend since the EU summit as pessimism that EU finance leaders would not be able to derive effective measures to resolve the sovereign debt crisis has made sterling a safe-haven asset in the short-term. We do not expect this to continue this year as the UK has its own fiscal and economic problems to struggle. The disaster these might cause is not less than the debt problems in the17-nation region. An option to alleviate the economic problems would be … Read entire article »

By: Barbara Zigah The Euro struck a 16-month trough against the U.S. Dollar in Asian trading as negative headlines out of the Eurozone weigh. As reported at 11:19 a.m. (JST) in Toyo, the Euro was trading 0.2% lower at $1.2694, recovering from an earlier struck low of $1.2666 struck on the EBS trading platform. The common currency also fell to an 11-year low versus the Japanese Yen, trading at 97.28 Yen before recovering slightly to 97.65 Japanese Yen, still a loss of about 0.3%. One FX strategist said that his firm had revised downward their forecast for the Euro-Dollar to 1.25, as well as all of the Euro-crosses. The bearish sentiment is likely to continue; according to the CFTC, short positions in the Euro hit a record level for the first … Read entire article »

We expect the movement of Japanese yen this year will be directed by factors including BOJ’s intervention, risk appetite and Fed’s QE3. Optimism of FOMC policymakers and the fiscal situation in the US will exert downward pressure on USD/JPY in the first half of the year but the BOJ will likely defend the level of 75 via intervention. Upside of the currency pair will also be capped by sluggish US economic growth and probable implementation of Fed’s QE3 later in the year. In this case, USD/JPY will likely be range-bounded this year. Japan’s GDP grew +1.4% in 3Q11, signaling a strong improvement after the earthquake in March. Yet, the main contributors to growth were exports and private spending while government spending was small and capital spending by businesses even shrank. The … Read entire article »

Dollar opened the week higher as markets are back in a risk off mode. A couple of news are weighing on market sentiments in Asia. IMF’s chief economist Olivier Blanchard said that the fund will make a “fairly substantial” cut to global growth forecast this year even though it has already lowered 2012 growth projection to 4% back in September. He expects growth to be “not very far” from 3-4% with Europe “very close to zero”. The fund will publish the revised forecast later in January on 24 or 25. Meanwhile a German magazine reported over the weekend that IMF is losing confidence in Greece’s ability to fix the public finances problems. The magazine said IMF saw three options for Greece, including enacting further austerity, private creditor write off, or … Read entire article »