Expert Analysis of Today's Market

Yen Falls as Equity Markets Stabilize

Hans Nilsson 2008-01-07

The dollar rose against the euro and yen on Monday. The USD/JPY rose for the first time in eight trading days as stock markets in Europe and the US stabilized after last week’s sell-offs. The yen is likely to continue trading in an inverse relation with the equity markets. The Swiss Franc also fell against the dollar while most other key currencies were little changed.

Despite recessionary concerns in the US, the EUR/USD has been unable to make new highs. That the pair has been unable to rally on bullish news may be an indication that the pair is reaching a peak possibly close to a reversal.

Financial and Economic News and Comments

US & Canada

Bank of Canada Governor David Dodge said the “appreciation of Canadian dollar against US dollar is clearly having a slightly greater downside impact on our domestic inflation than we had estimated last October.” He added “downside risks to Canada from slower US growth in the first half of 2008 are probably greater than we had estimated.”

Europe

EMU unemployment remained at a record low of 7.2% in November, a European government report showed.

EMU producer prices rose a stronger-than-expected 4.1% y/y in November, the most since December 2006. The increase was above the 3.3% y/y in October.

European Central Bank President Jean-Claude Trichet said central bankers are “very satisfied” with their efforts to calm money markets and they remain in close contact regarding further action. Asked if central banks plan any further coordinated intervention, Trichet said: “We will remain in very close and confident contact in the future, as we have in the past.”

Asia-Pacific

Chinese central bank Governor Zhou Xiaochuan said Chinas’s trade surplus, inflation and Chinese institutions selling currency reserves “may be major factors to the formulation of the exchange rate.”

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