The immediate concern is that the slew of PMIs out early next
week will suggest that the global recovery is stumbling,
including in the US. Asia has the potential to trade on the weak
side in this environment. There will be a risk of some unwinding
of the recent rise in Asian yields if both the Chinese and US
PMIs disappoint. By Monday, we could be trading in another risk
aversion trading environment. The dollar has ended the week on
firmer footing, a sign that month-end rebalancing and positioning
has been completed , allowing investors to go back to trading
fundamentals, which remain dollar positive. With the BoJ meeting
twice in April, a percentage of the market remains bearish on
Japanese yields as they price in policy easing at the second of
Below are some other highlights of the week:
- JPY: BoJ Governor Shirakawa warned of the risk of keeping
interest rates low for too long. He said, "If low interest rates
induce investment projects that are only profitable at such
interest-rate levels, this could have an adverse impact on
productivity and growth potential of the economy by making
resource allocation inefficient."
- NZD: Kiwi trade balance was back in surplus of $161 m in
February, following a revised deficit of $159m in January.
Exports fell -6.9%, y/y, to $3.59b from a revised $3.73b while
imports dropped -6.6%, y/y, to $3.43b from a revised $3.89b in
- CNY: Chinese industrial companies had their first
January-February profit decline since 2009 as slowing exports and
a government campaign to cool property prices damped earnings.
Year to date, industrial profits declined by -5.2%, y/y, in
February, compared with a +25.4%, y/y, gain in January.
- KRW: Korea's consumer confidence rose to 101 in March from
100 in February, the highest level in four-months.
- PHP: The Philippines' imports fell -3.2%, y/y, in January
following a revised -6.4%, y/y, decline in December.
- KRW: Korea's manufacturing confidence index rose to 85 in
April from 84 for March, the highest level in six months. The
non-manufacturing index for April advanced to 82 from 80 in
- THB: Thai exports unexpectedly rose +0.9%, y/y, in February,
stronger than the consensus forecast for a -5% fall and has
helped push the trade balance back into a $530m surplus from a
$1.1b deficit in January.
- BRL: The Brazilian finance ministry has denied they were
studying expanding the IOF tax to all FX transactions.
- CNY: A Chinese state-owned company reportedly has defaulted
on commercial paper worth 400 million yuan ($63.4m) maturing on
April 15 as they are expected to miss their loan payments. Expect
the government to likely intervene ahead of a contagion event.
- JPY: Japan's retail sales rose more than forecasted for
February, up by +3.5%, y/y, after a +1.9% increase in January,
the biggest advance in nearly two-years and a third straight
- CNY: China has approved a pilot project to allow residents of
Wenzhou to invest privately overseas as a test bed for future
liberalization of the capital account.
- KRW: South Korea recorded a current account surplus of +$639m
in February following a revised -$969mn deficit in January.
- NZD: New Zealand's NBNZ business confidence index rose to
33.8 in March, up from 28 in February. Also, the NBNZ activity
outlook index increased to 38.8 from 31.2 in February.
- AUD: Aussies ABS quarterly job vacancies rose by +0.7% in
February compared with a revised fall of -3.4% in November.
- JPY: Japan's IP unexpectedly fell -1.2%, m/m, in February
after a +1.9% gain in January. Inflation, on the other hand,
surprised to the upside with headline CPI rising +0.3%, y/y,
while core-CPI (ex-food and energy) fell -0.6%. The market
continues to sell JPY on dollar pull backs.
- AUD: Aussie new home sales recorded a modest gain of +3%,
m/m, in February following large drops in the previous two
- NZD: Kiwi building permits fell -6.7%, m/m, in February after
an +8.3% rise in January.
AMERICAS Week in FX
Europe Week in FX
- A busy week of PMI reporting from GBP, USD and CAD
- AUD, EUR, PLN and GBP Central Banks deliver their rate
- USD releases the FOMC minutes
- Employment reporting comes from USD and CAD
- Aussies give us Building approvals and Trade data points
- Retail Sales is released by AUD and CHF
- Inflation is noted in CHF
- GBP has HPI and Manufacturing Production to deal with
- Finally, the Kiwis report their Business confidence findings
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