Nomura: Shorten the dollar in the summer

Temperatures are rising, and hence the tensions in foreign exchange markets. Japan's largest financial institution, Nomura Holdings Inc., has one offer for currency traders. And it is - to shorten the dollar in the summer.
The financial institution is of the opinion that a short dollar may be a good idea for the next three to four months. The recommendations are to shorten the dollar against the yen and the euro.
Since January, green money has been the strongest base currency, backed by Fed's rising interest rates.
Yesterday, the Fed kept the level of interest unchanged, warning that inflation was almost at the target level. Nonetheless, Nomura is of the opinion that the interest rate increase, which was not implemented yesterday, may begin to slow down.
And in an environment of expectation of ending the incentives from other leading banks around the world, the dollar may begin to decline compared to other major currencies, Nomura said.
Together with rising US inflation, Nomura believes that further interest rates, albeit at a slow pace, will have a very negative impact on the bond market.

The Japanese bank kept interest rates, the yen with a two-month bottom

The yen fell sharply against the dollar after the Japanese central bank kept the interest rate and the volume of its asset redemption program unchanged.
This happened contrary to the comments that came after the Fed meeting yesterday and pointing to another raise in interest rates by the end of this year.
The decision of the Japanese central bank did not surprise the market, with all experts, which gave their forecasts for Bloomberg, were expecting such a solution.
The Asian indices traded mixed, with the Japanese ones rising, backed by the yen's depreciation. Earlier this morning the dollar was traded for 112.42 yen, the highest level since nearly two months.

The Japanese bank is expected to reduce its inflation forecast

Japan's central bank is expected to lower its forecast for inflation, but to refrain from increasing its incentives this month. This would be a step back from the promise of Haruhiko Kuroda, the head of the Japanese central bank, to do what it takes to reach inflation targets.
A potential fall in inflation forecasts in Japan would be another blow to the central bank as well as for the yen. The latter is already experiencing the negative impact of these expectations, with USD/JPY rising to levels above 113.50 yen.
The meeting of the Japanese Central Bank will be held on 19-20 July, which is expected to keep the monetary institution unchanged. But what investors will follow is what the bank will say about the state of the Japanese economy as well as about inflation.
Otherwise, expectations are for the CCB to reduce its inflation forecast for this year, ending March 2018, and for the next year.

The dollar continues to grow against the yen after the decision of the JCB

The US dollar continued its strong appreciation against the yen. The Japanese central bank has kept its ultra-stimulation program unchanged.
The dollar index dropped by 0.1 percent to 97.461, compared to 97.48 in the US session. The index is headed for an increase of 0.2% this week.
However, the dollar's growth continued against the yen after the Japanese central bank decided to keep its stimulus policy on Friday. By voting 7 against 2, the bank continued to maintain negative interest rates of 0.1%. The dollar rose to a trading level of 111.40 yen. For comparison, on Thursday, the currency pair traded about one yen down.
The Japanese bank said it expects the Japanese economy to continue its recovery, backed by a policy of mild monetary policy.

Protective assets are back in fashion (2)

Moreover, in the event of a Trump failure, the sales on the stock exchanges will activate and can be transformed into a tangible drawdown, especially given that the indices fall from record highs. Against this background, players will continue to show interest in the Japanese yen and gold. The precious metal, which rallies over the past six trading days has almost actually played the fall, which started in late February and reached its highs on March 1 at around 1249.33.
The development of the current trend on world markets is able to send gold quotes above 1250, and USD/JPY in this case risks targeting the lows on November 22 last year at 110.25.

Protective assets are back in fashion (1)

These days the prolonged rally of the US stock market was interrupted and resulted in a mass avertion from risky assets in all trading floors of the world. In these conditions, the Japanese yen naturally became the beneficiary and updated the highs of the current year paired with the dollar. USD/JPY has been falling continuously for the seventh day in a row, and today the quotations reached an important support level at 111.00, the breakdown of which will open the way to new records.
Investors are showing concern about the implementation of the plans of the Trump's administration. Tomorrow will be a fateful vote on the abolition of health care reform. And the importance of this event for the markets is that the outcome of the vote will show how successful Trump initiatives will be in the future. Especially the players are concerned about the future of the promised fiscal incentives and tax reform. So, at least until the results of discussion of healthcare reform in the markets are announced, the current tension will remain, and the protective assets will continue to be in demand.

The dollar is experiencing problems in the formation of growth against the yen

The dollar was supported against the yen last week, ahead of a speech by Federal Reserve Chairman Janet Yellen. But after her speech the dollar again came under pressure.

Overall statements of the President of the Federal Reserve were favorable for the dollar, but it was not enough for the formation of a stable uptrend in the pair USD/JPY. The Japanese currency is highly dependent on the dynamics of yields on US Treasuries. Yellen's speech gave no clear idea how many times this year interest rates will be increased and with what pace. This information was not enough and 10 year bonds rose by above 2.5 percent. Anyway bullish trend in USD/JPY looks extremely hard.

In the area between 114 and 115 yen for dollar there are active sellers. We must not forget that in Japan the new fiscal year begins on April 1. Before that there is support for the Japanese currency.

Dollar declines in anticipation of the promised by Trump incentives

Dollar drops slightly on Tuesday as investors took a wait on the eve of the US president's speech in Congress.
By 11.48 GMT the dollar index slowed down by 0.01 percent to 101.120 against a basket of major currencies after a modest growth in the previous day.
The US currency strengthened after Trump called for a "historic" increase in military spending, which improved appetite of dollar "bulls" before the speech of the American president in Congress.
Dollar Index reached a peak of 14 years shortly after Trump won in the November election against the backdrop of expectations that he will present an ambitious program of fiscal stimulus.
However, the US currency has recently gave up positions, as the administration of Trump has not explained the details of the plans, particularly those regarding tax reform, so the focus has shifted to the President's appearance before the Congress.
Dollar slowed down by 0.15 percent against the yen to 112.50 yen.
The euro gained 0.06 percent against the dollar to $1.0590, moving away from the week peak of $1.0631 reached the previous day.

The dollar rose to a new wave of optimism

The dollar rose against other major currencies on Friday, recovering from the fall of the previous session to a minimum for the week. Strengthening of course is due to the wave of optimism about the economic situation in the US and more likely interest rate increase in March.
The dollar retains support after a report on Tuesday of Janet Yellen before the US Senate Banking Committee, in which she pointed out that the US central bank will raise the interest rate on one of the following of its meetings.
Yellen said that waiting too long before raising interest rates would be unreasonable under the condition of economic growth and increasing inflation.
In addition, the strengthening of the dollar was due to the positive US statistics on the number of initial applications for unemployment benefits and the number of construction permits.
EUR/USD slipped by 0.22% to 1.0650, down from 1.0682 week high.
The pair GBP/USD fell by 0.52% to 1.2425 after a report in the National Statistical Service of the UK (ONS) said that in January, the volume of retail sales decreased by 0.3% compared with growth forecast for 0,9%.
USD/JPY dipped by 0.43% to 112.75, and USD/CHF rate rose by 0.13% to 0.9984.

The dollar fell because of concerns about Trump's protectionist measures

The dollar was held near seven-week lows in Asian trade on Tuesday under pressure from investors' concerns about the possible impact of protectionist position on trade of the US President Donald Trump.
The dollar index by 5.20 GMT increased by 0.1 percent to 100.070 after falling to 99.899 on Monday - the lowest level since Dec. 8.
The dollar against the yen gained 0.1 percent to 112.78, but earlier reached the level of 112.52 - the lowest level since 30 November, much below the maximum of 114.45, reached at night.
Trump on Monday formally brought the United States out of the Trans-Pacific Partnership Agreement (TTP), distancing America from its Asian allies. He also said that he intends to revise the North American Free Trade Agreement (NAFTA).
The negative impact on the dollar has also had a decrease in yields on US bonds. Yield on indicative 10-year Treasury bonds showed a biggest of more than two weeks in a one-day decline, as fears about the consequences of a tough stance of Trump on trade increased demand for safe bonds.
The euro fell by 0.1 percent to $ 1.0753, earlier reaching $1.0774 - the highest value since December 8th.

The yen has fallen, Trump raised fears about a possible trade war

The dollar rose against the yen on Friday during the Asian trading session, after US President-elect Donald Trump on Twitter criticized the largest Japanese car company, prompting fears of a possible trade war between the United States and the leading Asian trading partner.
"Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax," Trump said in a post on Twitter. USD/JPY was trading at 116.19, gaining 0.72%.
Yesterday, the US dollar has fallen relative to other major currencies, after the minutes of the last meeting of the Federal Reserve pointed to the uncertainty about the possible consequences of the economic policies of the future Trump presidency.
The index reached its highest level in 14 years on Tuesday as strong performance in the US manufacturing strengthened expectations about the high rate of monetary tightening in 2017.
But the dollar came under pressure on Wednesday after the Fed's minutes, which were held on December 13-14, showed that officials noted "considerable uncertainty" about the policy of President-elect Donald Trump.
Trump takes office on Jan. 20, and so far has not voiced the details of his economic policy.

The dollar fell after the release of weak ADP report

Dollar drops against the major currencies after data from ADP showed that employment in the US private sector grew in December, much less than expected.
ADP reported that the level of employment in the private sector rose to a seasonally adjusted 153 thousand last month, below the projected increase of 170 thousand.
In November 215 thousand jobs were created.
The ADP report is not considered as an accurate indicator about government NFP data, which will be published today, January 6, but can serve as a reference for market participants.
The EUR/USD after the publication of this news has increased by 0.5% to 1.0540 (by 13:45 GMT).
USD/JPY has fallen by 1% to 116.06.
USD Index, which tracks the greenback against a basket of six major currencies, fell by 0.4% to 102.06.
Previously, pressure on the US currency made published protocols of the December meeting of the Federal Open Market Committee (FOMC) of Federal Reserve, which emphasized on the uncertainty as to the likely impact of the policy of the new administration of Donald Trump on the US economy and the Fed's monetary policy.

The future of the dollar after Fed (Part 2)

The reasons the Fed wants to increase the interest rate are few as two members even voted for the immediate lifting. In addition there are also improvements in the US economy as consumer spending, which are on the rise, job growth, low unemployment, higher consumer prices and housing market. These improvements led to a rapid increase in inflation and to avoid this Fed should immediately raise interest rates.
As for how interest rates rise will affect the US dollar, it is expected that there will not be a significant change, unless the Fed does not surprise markets with lifting with half a percentage or with a refusal to do that.
There are different possible outcomes of the meeting of the FOMC, which will determine the movement of the US dollar. Depending on the expectations and comments by Janet Yellen, the future of the greenback could largely be understood. If Yellen declares long-term pause or obscure term for subsequent lifting of interest rates, it can be expected more aggresive fall of the dollar. On the other hand, if Yellen expressed optimism about the economy and the need to tighten monetary policy, a new growth of the  dollar is not excluded.

The future of the dollar after Fed (Part 1)

The last time the Fed tightened monetary policy was in December 2015, but that will change after a few days, as the US central bank is preparing to raise interest rates for the first time this year.
Much has changed in the last year, but one thing remained the same, and it is that messages about monetary policy are major driving forces for the currencies, especially when the central bank is preparing to make a significant change of policy.
Everyone expects the Fed to raise rates, but what will be the reaction of the US dollar?
In general lifting of interest rates is positive for the currency, but in this case the US dollar has reached record levels. When the Fed last raised interest rates, there was a short continuation of growth of the dollar, followed then by a sharp turnaround, as USD/JPY from 123.57 reached 116 within a month and to 111 in just two months. Back then the chance of lifting interest was estimated at 75%, while now it is 100%.

USD/JPY

The US dollar still will grow today in terms of published in China moderately pessimistic statistics on the trade balance for November. The reduction reached 44.61 billion yuan, against 49.06 in October. At the same time for January-November the total amount of China's foreign trade decreased by 6.9% compared to the previous year and amounted to $3.31 trillion. Despite the fact that the values for the previous month was even worse, and it would be necessary to wait for the optimism of investors, actual data will be more representative at the end of the year. That's why for the USD/JPY pair there is a prospect of growth by the end of the day.

Dollar rises in price against the yen, depreciates against the euro

During today's Asian trade, the dollar continues to appreciate against the yen depreciates against the euro.
By 6:30 GMT the dollar against the yen rose to 113.57 yen compared with 113.33 yen at the close of the previous session. During the trade session the value of the dollar rose to 113.9 yen - the highest since March 15.
The US currency has risen by almost 10% against the yen since November 4, and its rise over the 3 weeks is the highest since 1995, Bloomberg reported.
Euro at the same time was worth $1.0574 versus $1.0554 at the close of the previous trading.
Forecasts of the acceleration of inflation and the rate of US GDP growth in the implementation of policies D.Tramp voiced during the election campaign, has led to an increase in US Treasuries yields to the highest level this year. It supports dollar, as well as promotes the growth of expectations that the Fed will raise the base interest rate, experts say.
Minutes of the Fed's November meeting, released on November 23, showed that the leaders of the US central bank is actively discussing the rise in interest rates during the last meeting, and came to the conclusion that the increase may become expedient quite soon.
Traders estimated at 100% the chance of a rate increase by the Central Bank in the US December meeting.

Dollar back on the top

After yesterday's shake-up, the rate of the dollar has stabilized and is trading at a "bullish" bias against most currencies. Investors continue to buy risky assets, against which one of the main outsiders remains the yen. USD/JPY easily broke 106.00 and has come close to the next psychological mark.
After Trump's victory the markets are wondering how policies of the new president will be reflected in the rate of growth of the US economy and the world economy as a whole. Rally in the segment of risky assets suggests that players are optimistic about the future, betting on the development of business, tax cuts and increased investment in infrastructure. At the global level, there are also fears that Trump would unleash a trade war that would hit many economies of the world.
Positive attitude of the USD was supported including by expectations with respect to the December Fed rate increase. Today, the probability of such events is estimated at 80%. In other words, the tightening policy of the regulator is considered a foregone conclusion, although in the moment immediately after the announcement of election results, the rate fell below 50%. Today, the players concerns about policy changes in the Central Bank partly dispelled by Trump's statement that he does not intend to request early retirement J. Yellen.
Among the next economic events that should pay attention to the aspect of the prospects of increasing the cost of credit in the United States, we can point the report on retail sales, announced for next Tuesday. If the result exceeds forecasts, the remaining doubts about the December tightening will almost completely dispell, and the USD will receive an additional boost to growth.

Scotiabank: The yen continues to grow

On Tuesday, the yen rose against all major currencies, despite the long-awaited publication of the plan for fiscal stimulus in the country. This behavior of the Japanese currency comes in response to a statement by the Japanese government yesterday and the decision of the Bank of Japan last Friday, indicating a high probability for further growth of the yen, reported analysts.

According to their short-term technical indicators USD/JPY draws bearish picture. The couple aims to test the zone around 100.45 yen.

Why are everybody is waiting for the meeting of the Bank of Japan?

USD/JPY is now a fairly complex market. Tomorrow's meeting of the Bank of Japan's is getting nerves of traders heated up much stronger than yesterday's meeting of the Federal Reserve. Market participants are in doubt - bet on increasing of monetary stimulus, or mentally prepared for the fact that on Friday the Bank of Japan would not live up to expectations?
The fact that on Wednesday the Japanese prime minister Shinzo Abe announced a solid amount of fiscal stimulus measures package of 28 trillion yen increases the pressure on the Bank of Japan in terms of action. Earlier, the head of the Central Bank Kuroda emphasized that fiscal and monetary easing are effective when used together. Apparently, the Japanese government wants from the formally independent central bank further policy easing. According to one point of view, for the Bank of Japan it is strategically important to act now, because with conscientious actions with the government the effect of the measures will be higher. According to Bloomberg, 80% expect the Bank of Japan will increase incentive program this week.
From another point of view, the measures taken by the Japanese government as well as the fact that the USD/JPY is trading at 105.00, and not at a critical level at 100.00, on the contrary, mean that the Bank of Japan decides to reserve monetary stimulus for "rainy days". Huge amounts of money, which the Japanese regulator has poured into the financial system of the country, could not help inflation. The more money "prints" the Japanese Central Bank, the harder it becomes to manage the situation. The lack of action by the regulator will cause the resumption of downtrend of USD/JPY, and bears rush to new lows. The Bank of Japan, of course, is aware of the pressure under which it is located and the potential consequences of inaction - that's why the majority of analysts believe that the amount of monetary stimulus will still be increased tomorrow.

Review of major currencies

USD - The dollar will strengthen its position as a safe haven, if the markets will return to the reaction to Brexit, but if the mood changes, USD may begin to decline, particularly against commodity currencies. The dollar should soon gain traction, or uncertainty will begin to grow rapidly. Also today comes an important report on the PCE inflation.

EUR - ECB and Europe need to do something with the banks to avoid a credit crunch and a cooling economy. Many overpraise the positive current account balance in Europe, considering that this is a plus for the currency, forgetting that, among other things, it is a sign of Europe's dependence on the world economy - in particular this applies to Germany with unprecedented high export intensity.

JPY - Yen can keep up with the dollar, if the current rise in risk appetite quickly fade away and turn into a new wave of sales of risky assets - but the real threat of intervention and incentives already looming on the horizon - perhaps the new measures will be taken after the elections to the upper house of parliament on July 10.

GBP - Pound may continue to decline, but, given the scale of the new range, consolidation could make it difficult for the bears to find the entry point. Yesterday's high at 1.3400 in the pair GBP/USD is the first pivot point after the Brexit.