Tuesday, April 2, 2013

Dollar Drops To Yen On Slow U.S. Recovery.

For the first time since early March, the Dollar has dropped past 93 Yen as the market focused on data due out during the week which is expected to show that the recovery in the U.S. job market has not been quick enough to have the Federal Reserve reduce monetary stimulus.

Data is expected to show that U.S. Companies likely have added 200,000 jobs in March, after a rise of 198,000 in February, when ADP Research Institute releases the data on Wednesday.

Government figures due to be released on Friday could show that the jobless rate was 7.7% in March, the same as for February.
 
The Fed has said that it will hold its benchmark interest rate near zero for so long as the unemployment rate will remain above 6.5% and while inflation is projected to be less than 2.5%.

It appears for now, that the U.S. economy isn't strong enough for us to see any significant drop in the unemployment rate, so I don't expect that we will see the Fed pulling back from its stimulus.

On Monday the difference in yields between 10-year Treasuries and Japan's bonds declined to 1.26% points, the lowest in a month, and this has sapped the relative advantage of Dollar-based assets.

The Yen though has climbed to a five-week high as against the Euro. Investors have been anticipating whether there will be any new stimulus from the Bank of Japan (BoJ) during its two-day meeting set to start on Wednesday.

Earlier today Shinzo Abe, Japan's Prime Minister, had announced in parliament that the BoJ should not pursue a 2% inflation target "at all costs." He expects that they might fail to achieve it should global conditions change.

The BOJ board is also expected to convene later this month on the 26th of April.

What we are seeing at the moment is some profit taking ahead of tomorrows BOJ meeting.

Earlier today the Dollar dropped 0.2% to 93.09 Yen and lost 0.1% to $1.2859 per Euro. The Yen advanced to 119.20 per Euro.

Italy's President Giorgio Napolitano is due to meet with advisers today for talks on forming a new government. The meeting will be followed by an European Central Bank (ECB) monetary policy meet on Thursday.
 
The 87-year old's mandate ends on the 15th of May and for the moment, Italy's political impasse has extended into this month following inconclusive elections in February. While uncertainty persists, the Euro remains in a downside risk.

Australia's Dollar today extended a gain by appreciating 0.3% to $1.0457 after the Reserve Bank of Australia (RBA) Governor Glenn Stevens and his board left the overnight cash-rate target at 3%, as had been expected by most economists.