INS: Japanese Yen outperforming majors on FX markets
The Japanese Yen is outperforming the majors, up 0.4% against the US dollar and strengthening for the second consecutive session, amid a retracement of its recent decline.
"Headline-driven weakness in JPY, initially on news of Japan purchasing European Stability Mechanism (ESM) bonds, has been reversed as details emerged that the purchases would be completed via a reallocation of existing FX reserves," says Eric Theoret at Scotiabank.
Other highlights include comments from Economy Minister Amari reinforcing expectations of cooperation between the government and the BoJ - specifically on price stability - ahead of the central bank meeting later this month.
Finally, Prime Minister Abe has confirmed the January 11th release of a stimulus package, with expectations of a comprehensive strategy set for mid-2013.
Elsewhere: Euro rally proves short-lived
EUR is essentially flat to yesterday’s close but has rallied 1.0% since Friday’s low of 1.2998. Early in the Asian session EUR rallied as Japan’s finance minster Aso spoke about his desire to use FX reserves to buy European ESM bonds, which introduced buying pressure in both EURUSD and EURJPY; however the rally was short lived as Europe released a slew of mixed economic data.
Eurozone retail sales disappointed expectations, rising just 0.1%m/m; however the upward revision to the October release offset the weakness.
Eurozone unemployment rate rose to a new record of 11.8%; while confidence was slightly stronger than expected. In Germany, exports and imports were notably soft, driving a widening in the trade surplus to €17bn.
The New Zealand Dollar is enjoying a strong period, "The NZ$'s rally is reflected in its Trade Weighted Index, which gained 0.4% on Monday to challenge the yearend overbought high at 147.89. With the RSI indicator still in neutral territory, there is a chance that that barrier will yield, opening the path to the 2007 peak near 150," points out analyst C Dichio at Investors Intelligence.
The Australian unit is one of the currencies to suffer versus the New Zealand denomination.
"Shedding 0.4%, the Aussie retreats from the late-2012 high at NZ$1.2700; retracing more of the 'bear trap' recovery from the early-2012 intraday low at NZ$1.2441. Watch for support near that floor. Nonetheless, the sideways barrier at NZ$1.2700 will have to eventually yield to confirm basing by the A$," says Dichio.
Economics: Australian dollar finds trade data a tad unhelpful
Australia’s trade deficit widened by more than expected in November to AUD2.637bn (mkt: AUD2.3bn).
However, the miss relative to market expectations can be wholly explained by historical revisions, with the trade deficit revised around AUD350mn wider in October to AUD2.443bn.
This was mostly due to higher imports than previously measured. Revisions of this type have been common over the past year or so, partly because the ABS has difficulty accurately measuring resources-related imports (capital and services) in real time.
The value of exports rose 1.2% m/m in November, a little less than we had expected but this was largely due to a steep 9% m/m fall in the volatile non-monetary gold component.
Excluding this category, export values were up a healthy 2% m/m. Metal ores and minerals exports rose by a strong 6.2% m/m, in part due to higher iron ore prices on our reckoning, but coal and other resource exports declined. Manufacturing, rural and services exports all rose solidly in the month.
The value of imports rose 1.8% m/m, which was slightly lower than foreshadowed by the ABS merchandise imports release. Excluding lumpy goods, ‘core’ imports were 2.2% m/m higher.
