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Finotec News Archive - September 05 2008

Yen surges as Carry Trades unwind

The Yen surged to its highest level in over a year against the Euro as investors unwound positions in higher yielding currencies.

Toby Koehler
05 September 2008

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	EUR/USD	USD/JPY	GBP/USD	USD/CHF
Resistance	1.4665 1.4620 1.4545	108.55 107.85 107.60	1.7890 1.7855 1.7685	1.1605 1.1460 1.1200
Support	1.4220 1.4125 1.4015	106.50 105.75 105.65	1.7540 1.7420 1.7230	1.1090 1.1030 1.0970

The Yen surged to its highest level in over a year against the Euro as investors unwound positions in higher yielding currencies. Pessimism over the global economy has caused increased selling of assets that give high returns. So called carry traders have pulled out of their positions as global stock markets have dipped, pushing the Yen higher. After the Euro fell 3.6% against the Yen on Thursday, the EUR/JPY hit a 13 month low Friday. Yesterday’s drop was the largest one day drop since the currency of the euro zone was introduced. The EUR/JPY was trading at 151.68 at 8.15am GMT from a 13 month low of 150.60 earlier on Friday.
Meanwhile eyes will be on the US later on Friday as key employment data is released. The expectation is that the US probably lost jobs in August for the 8th straight month with analysts predicting August payroll fall of 75,000. The US unemployment rate will be reported at 12.30 GMT with estimates ranging from 5.5 to 5.9 per cent. This data will be vital in determining whether the US can stage a recovery.
There were more woes for the pound as the Bank of England kept rates on hold yesterday. The Monetary Policy Committee had a difficult task fighting impending recession and surging inflation. Keeping the bench mark interest rate at 5% was in line with analysts’ expectations but will likely keep economic recovery on hold for the time being. ``Sterling is really seen as the currency-market dog, if you like, in being seen to be sold for any reason you can possibly think of,'' said senior strategist at Rabobank International. ``It is difficult to find too many ways to be positive about sterling.'' Sterling had been pushed lower an HBOS report indicated that house prices fell for the 5th straight month. At 8.42 am GMT sterling was trading at 1.7624 against the dollar. 1 Euro was worth 1.4234 dollars at the same time.

Finotec Analysis Team
05 September 2008

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Today's Economic Events

Time	Event	Currency	Period	Previous	Forecast	Actual
14:00	Ivey PMI	CAD	Aug	65.5	62.5	51.5
The Ivey Purchasing Manager\'s Index (PMI) measures the activity level of purchasing managers from all sectors of the economy, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation\'s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
12:30	Non-farm Employment q/q	USD	Aug	-51K	-73K	-84K
Measures the number of new jobs created in the previous quarter, excluding the farming industry. A rising trend has a positive effect on the nation's currency. The number of new jobs being created is one of the most important indicators of the economy's health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP.
12:30	Unemployment Rate	USD	Aug	5.7%	5.7%	6.1%
Measures the percentage of the total work force that is unemployed and actively seeking employment. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
12:30	Average Hourly Earnings m/m	USD	Aug	0.3%	0.3%	0.4%
Measures the rate of inflation found in the wages paid to nonfarm jobholders
11:00	Employment Change	CAD	Aug	-55.2K	8.0K	15.2K
Measures the change in number of employed people during the previous month, excluding the farming industry. A rising trend has a positive effect on the nation\'s currency. Job creation is an important indicator of economic health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP.
11:00	Unemployment Rate	CAD	Aug	6.1%	6.2%	6.1%
Measures the percentage of the total work force that is unemployed and actively seeking employment. A falling trend has a positive effect on the nation's currency. Working people tend to spend more, and consumer spending is a major driver of the economy. However, unemployment usually draws little attention because traders view it as a lagging indicator.
06:50	ECB President Trichet Speaks	EUR

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Event Date

PPI m/m(EUR)	20.11.2008 07:00
Trade Balance(CHF)	20.11.2008 07:15
Retail Sales m/m(GBP)	20.11.2008 09:30
Public Sector Net Borrowing(GBP)	20.11.2008 09:30
Wholesale Sales m/m(CAD)	20.11.2008 13:30
Unemployment Claims(USD)	20.11.2008 13:30
Consumer Spending m/m(EUR)	21.11.2008 07:45
Interest Rate Statement(JPY)	21.11.2008 00:00
Manufacturing PMI(EUR)	21.11.2008 08:00
Services PMI(EUR)	21.11.2008 08:00
Manufacturing PMI(EUR)	21.11.2008 08:30
Services PMI(EUR)	21.11.2008 08:30
Manufacturing PMI(EUR)	21.11.2008 09:00
Services PMI(EUR)	21.11.2008 09:00
Italian Retail Sales m/m(EUR)	21.11.2008 09:00
Core CPI m/m(CAD)	21.11.2008 12:00
CPI m/m(CAD)	21.11.2008 12:00

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