Monday, January 21, 2013

FOREX-Yen selloff fades before high-stakes BOJ decision

By Ian Chua SYDNEY, Jan 22 (Reuters) - The yen's recent violent selloff came to an abrupt halt Tuesday as investors waited to see if the Bank of Japan would deliver its most aggressive effort yet to beat years of economic stagnation, or disappoint as so often in the past. The dollar bought 89.63 yen, having peaked at a 2-1/2 year high of 90.25 on Monday. Since Dec. 4, the dollar has rallied an eye-watering 10 percent on the yen. The BOJ, which is starting its policy-setting meeting earlier than usual, is under intense political pressure to overcome deflation and lift the world's third biggest economy out of recession. But the Japanese central bank has a track record of disappointing markets and traders said if it simply announces a new inflation target of 2 percent and raises the ceiling of its asset-buying programme by 10 trillion yen, the yen could bounce back strongly. "Given the transparency surrounding this meeting...there is a strong possibility that this is a typical 'buy the rumour, sell the news' event," said Christopher Vecchio, currency analyst at DailyFX. On the other hand, if the BOJ committed to an open-ended asset-buying programme until its new inflation target is within grasp, traders said the yen could stay under pressure. The euro was at 119.38 yen, recoiling from a 20-month high around 120.73 set Friday. Trading was subdued overnight with U.S. markets closed on Monday for a public holiday. Against the dollar, the single currency was little changed at $1.3315. Since reaching a 10-month high of $1.3404 a week ago, the euro has struggled with selling interest seen above $1.3400. Still, with the European Central Bank recently sounding more cheerful about the outlook for the euro zone and dimming the prospects of more rate cuts, analysts suspect the euro can continue to outperform the dollar in the near term. The Bundesbank said on Monday Germany's economic slump should be short-lived, adding that the euro zone's largest economy could have already bottomed out. Commodity currencies also had a relatively sedated session overnight, leaving them steady against the greenback. The Australian dollar was at $1.0517, having traded in a slim range roughly between $1.0493/0525. Support is seen under $1.0500. The BOJ aside, there is no major economic news out of Asia on Tuesday. In Europe, a closely watched ZEW survey is expected to show German business morale and investor sentiment improved further in January.

Tuesday, January 8, 2013

Euro-Area Unemployment Rate Rises to Record 11.8% Amid Recession

The euro-area jobless rate rose to a record in November as the fiscal crisis and tougher austerity measures deepened Europe’s economic troubles.
Unemployment in the 17-nation region rose to 11.8 percent from 11.7 percent in October, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995 and in line with the median estimate of 27 economists in a Bloomberg News survey.
The euro-area economy has shrunk for two successive quarters and economists foresee a further decline in gross domestic product in the final three months of last year, forcing companies to cut costs by slashing jobs. The European Central Bank estimates contractions of 0.5 percent and 0.3 percent in 2012 and 2013.
“In the southern areas of the euro zone, demand is very weak and therefore there is no way to see fundamental improvement in labor-market conditions,” said Uwe Duerkop, an economist at Landesbank Berlin. “There might be some stabilization in the labor market in the second half of the year where one can expect this trend of growing unemployment numbers to stop, but that’s not the story for the moment.”
Today’s jobless report showed that 18.8 million people were unemployed in the euro area in November, up 113,000 from the previous month. At 26.6 percent, Spain had the highest jobless rate in the currency bloc. Germany’s jobless rate was 5.4 percent and France’s stood at 10.5 percent. Austria had the lowest rate at 4.5 percent.

Youth Unemployment

The data also showed that youth unemployment was at 24.4 percent, with Spain’s rate more than double that at 56.5 percent.
Spanish banks are reducing work places. BFA-Bankia, the biggest Spanish lender set to receive European bailout funds, will cut about 6,000 jobs, or more than a quarter of its workforce. Banco Santander SA plans to cut 3,000 jobs in its Banesto SA unit as part of its buyout plan, Cinco Dias newspaper reported on Jan. 4.
In France, Peugeot SA announced on Dec. 12 that it will eliminate an additional 1,500 jobs by 2014, on top of 8,000 job cuts announced in July. Germany’s Siemens AG said on Dec. 19 it is eliminating 1,100 jobs at two energy units in Germany.
Europe’s economic malaise is deepening as governments across the region impose budget cuts to narrow their fiscal deficits. Spain and Cyprus last year joined the list of countries seeking external aid, following Greece, Portugal and Ireland.
Failure to find a solution to the euro area’s troubles, and the U.S. debt-ceiling debate, will result in a “major world economic crisis,” International Monetary Fund Managing Director Christine Lagarde said on Jan. 5.