Rising inflation expectations and a diving Great British Krona helped another leg downhill on Tuesday by dire production data.
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“Whatever we can”, you say? Encouraging words from BoJ governor nominee Kuroda over the weekend (even if comparisons with Mr Draghi are overblown). If Cullen Roche is correct, what happens in Japan over the next year or many could change the future of economic policy. So it’s worth spending a bit more time on what Kuroda’s “can” might actually be.
Gotta love a good contrarian yen call.
As we’ve written multiple times, the yen’s recent fall been based on policy which has yet to appear, namely on expectations of Abenomics. Japanese authorities have done an excellent job of short-term monetary fear-mongering, but as Gavyn Davies put it recently there is a severe risk that the international hedge funds which have been driving the decline in the yen might come to the conclusion that the emperor has no clothes. Read more
All this has happened before and will happen again… at least, so hopes the Japanese government.
Current finance minister Taro Aso has been keen to channel the spirit of his 1930s equivalent Korekiyo Takahashi, whose polices are widely credited with pulling Japan out of the Showa Depression. It’s understandable. Read more
Dear everyone, this article is based on a questionable premise: that the dollar is about to head off on another bull run. We know this may not happen. Thanks, us. Read more
That’s Citi’s risk-warning signals beginning to spike over the past couple of weeks and especially over the last day or two. From Citi’s Steven Englander: Read more
Here’s the dovish BoE minutes that started sterling sliding (click through for the pdf): Read more
Japanese investors are a powerful bunch in world markets. For a microcosm of this, just look at Australia; Japan plays a big role here in debt and in turn, in currency; and it’s a market that has been very attractive to foreigners of late, keeping the currency stubbornly high regardless of price changes in the country’s key exported commodities. BUT, as with everything yen at the moment, there is a serious shift going on. Read more
“Oh, Hollande…” said Mario Draghi as the rest of us wondered if he had or hadn’t entered the supposed currency wars. Or if, in fact, the question was redundant.
The euro’s dive on Thursday was impressive and clearly the result of ECB president Draghi’s comments after the ECB’s rate setting meeting. But whether it was justified or not is very much contested. Read more
Japan’s Masaaki Shirakawa gave notice on Tuesday that he would be leaving his post as governor of the Japanese central bank on March 19, three weeks earlier than slated.
Can we blame Shirakawa? His departure now coincides with that of two deputy BoJ governors who would be replaced by Abe-nominations (we resisted the urge to go for ‘Abominations’; it wasn’t easy.).
If Shirakawa had stuck around he presumably would have found himself the head of an increasingly mutinous court. Read more
Yes, dear readers, it is awards season. The time of year when the content of the most ignored slides in pitchbooks is decided upon. Even disclaimers may be read more, if only to discover if the poor, hapless, underslept and under-exercised analyst who wrote it remembered to do a find-and-replace for the previous client to whom the book was presented.
It has come to our attention that in this latest round, a couple of banks are taking notably different approaches to the Euromoney FX survey. And of course, we couldn’t resist taking a look at the methodology of the thing. Read more
Are you a Swiss bank? Do you have haven appeal? Want to make some quick, easy money? Then keep reading…
Credit Suisse has decided it will start charging negative rates on Swiss franc cash balances above a certain threshold. From CS: Read more
THE YEN IS DOOMED, don’t ya know? And, to be fair, the longer term arguments are hard to fight against but the risk of a near to medium-term yen bounce is significant. Read more
Oh dear, many an FX trader is gonna be disappointed by this one — history suggests FX volatility is heading down, not up, as we exit November.
From Deutsche Bank’s Alan Ruskin… Read more
As a special treat, the below podcast.
FT Alphaville reporter David Keohane met Simon Derrick, chief currency strategist at BNY Mellon. They geeked out on various FX topics. Read more
Not many people seem bothered by France’s overnight downgrade by Moody’s. The euro shrugged and French bond yields crept upwards at a snail’s pace.
But one place the downgrade might have a real and lasting impact is within the Swiss National Bank. They have a predilection for core eurozone bonds and the downgrade might just prompt them to ditch what holdings they have and/or stop loading up on French debt.
This is from RBC’s Adam Cole who has been trying to get WOOT (World of One Trade) into the FX psyche for a while. So, l33t research indeed, but RoRo was always gonna be a tough meme to contend with.
Anyway… Cole’s point is that that there are more currency pairs uncorrelated to equities right now than at any time for five years. In fact, he says, correlations have started to break down to the extent that a majority of G10 currency pairs were uncorrelated with equity returns over the last three months. Another false dawn or an actual end to the dominant RoRo paradigm? Read more
The Bank of Japan’s unprecedented joint statement with the Japanese government after the central bank’s October meeting raised eyebrows around the world. The BoJ was already widely seen as having come under increased political pressure in recent months as the country’s economy had slowed; so what did the joint statement mean?
The statement contained a couple of key declarations: “The Bank strongly expects the Government to vigorously promote measures for strengthening Japan’s growth potential”, and “The Government strongly expects the Bank to continue powerful easing as outlined in section 2 until deflation is overcome.” Read more