Finotec News Archive - August 27 2007

Japanese Exporters push the yen higher

Rodian Rahnayev
27 August 2007

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The yen rose, snapping a three-day slide against the dollar and the euro, on speculation Japanese exporters bought the currency to settle month-end accounts. The yen gained against 15 of the 16 most-active currencies as Japanese companies judged a decline to a two-week low provided an attractive level to buy. The currency also benefited as a report on Aug. 24 showed more bets on a yen advance than a loss in the futures market for the first time since June 2006.

``Japanese exporters are buying the yen,'' said Nobuaki Tani, a client manager of the Market Trading Office at Resona Bank Ltd. in Tokyo. ``Some of them are still lagging behind in their yen purchases and the currency dropped to cheap levels.'' Tani said. Moves were exaggerated as some speculators avoided taking positions because of a public holiday in the U.K. today.

The yen got an added boost as futures traders reversed bets it will drop against the dollar, figures from the Washington- based Commodity Futures Trading Commission show. ``The yen carry trade isn't the one-way bet that it used to be,'' said Tokichi Ito, deputy general manager of foreign exchange at Trust & Custody Services Bank Ltd. in Tokyo. ``Some speculators may look for the yen to gain against the dollar. You can't expect everyone who's been burned during the yen's appreciation to immediately rush back to yen selling.'' The yen may move between 116.30 and 117.20 against the dollar today, he said.

The Australian dollar gained to 96.47 yen from 96.33 yen, the New Zealand dollar was little changed at 83.99 yen. ``The yen will head south,'' said Saburo Matsumoto, senior manager of foreign exchange sales at Sumitomo Trust & Banking Co. in Tokyo. ``Rising share prices are likely to give further momentum to the carry trade.''

Japan's 0.5 percent interest rate has given investors the opportunity to borrow yen and buy higher-yielding currencies overseas. Australia's benchmark is 6.5 percent and New Zealand's is 8.25 percent.

The euro may advance against the dollar on speculation European Central Bank President Jean-Claude Trichet will signal the region's economy is strong enough to withstand an interest- rate increase to contain inflation. Trichet speaks at 13:00 GMT in Budapest. The currency may gain for a fourth day against the dollar as investors raised bets the ECB will increase the benchmark rate from 4 percent when it meets on Sept. 6. The ECB on Aug. 22 said it was sticking to a policy stance expressed by Trichet on Aug. 2, when he pledged ``strong vigilance'' on inflation, a phrase that has signaled each of the eight rate increases since late 2005. ``The ECB has a history of signaling rate increases to the market and they will follow through,'' said Matthew Jones, a currency strategist at Travelex Australasia Group in Sydney. ``Inflation is still a concern. The euro will push up to the $1.37 level.''

Finotec Analysis Team
27 August 2007

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Today's Economic Events

Time	Event	Currency	Period	Previous	Forecast	Significance	Actual
23:50	Monetary Policy Meeting Minutes	JPY	Jul
14:00	Existing Home Sales	USD	Jul	5.75M	5.7M		5.75M
Existing Home Sales Measures the annualized number of existing residential buildings that were sold during the previous month.
13:00	ECB President Trichet Speaks	EUR	Aug
00:00	Market Holiday	GBP	Aug