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

	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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