Market Rumours

EUR/JPY falls to intraday low of 134.85 as speculators trigger stops in low-135s, with caution setting in before U.S. data on things like consumer sentiment, says trader at major Japan bank; while U.S. 3Q GDP was better than expected, "the figures weren't necessarily stellar enough to warrant continued buying" of higher-yielding FX. Tips EUR/JPY to keep to narrow 134.70-135.30 range in Europe, with few willing to position aggressively before weekend. EUR/JPY decline takes USD/JPY down to 90.94; expects 90.80-91.30 band.

********************************************************
BOJ's decision to end corporate debt buying measures in December as planned was somewhat expected, though comes amid rising long-term interest rates, says Dai-ichi Life Research Institute chief economist Hideo Kumano; "suppose the economic trends remain the same in months ahead, I think the BOJ will also end other fundraising relief plans in March. After that, the central bank will patiently wait for time when it can raise its rates from 0.10%, which won't come in the near future." Notes BOJ's view CPI to keep falling until FY11, but "I don't think the bank will take any additional easing measures other than keeping rates ultra-low." Says GDP forecast for FY11 of 2.1% growth is "surprisingly bullish" and "I need explanations from the governor" on such forecast.
*********************************************************

"It was short. It was brief. It's gone," says RBC Capital markets of USD strength. Notes greenback poised to end month on stronger note, "but an upside surprise in 3Q U.S. GDP data stopped the tentative rally in its tracks." Notes DXY set to record 7th monthly decline in 2009, with all 7 occurring during last 8 months. Says "Currency of the Month" award goes to AUD, almost +4.0% vs USD, while "Yesterday's Feather Duster Today's Peacock" award goes to GBP with gain of 3.5%. However, adds though "risk bulls loved the (U.S.) data...we remain slightly more circumspect", as data show little evidence that growth rate of 3.5% sustainable, with government programs dominating personal spending; "this is still a relief recovery (government money, inventories) and not necessarily the beginning of a sustained recovery based on improving consumer and business confidence."

EUR/JPY may rise due to recovering risk appetite thanks to stronger-than-expected U.S. GDP data, says senior dealer at major Japanese bank. Risk-taking should be also easier in Asia as Japanese stocks, which usually follow Wall Street cue, likely to gain after DJIA's 199.89-point rally. BOJ to hold policy meeting, at which they may discuss whether they should extend fundraising-relief programs past December, yet not many FX players paying too attention to it because they know BOJ can't hike rates anytime soon. Rather, they will focus on data such as German retail sales, U.S. personal spending, both for September, to gauge players' risk appetite. Tips USD/JPY in 91.00-92.00 range vs last 91.58, EUR/JPY may trade in 135.20-136.70 range vs last 135.87. EUR/USD may trade in 1.4800-1.4900 range vs last 1.4837.

Japan September core CPI drops 2.3% on year (vs 2.4% drop expected, 2.4% fall in August); CPI fall eases a tad on energy prices which cheaper vs last year, and September data "well in line with our expectations," says Shinko Research Institute economist Norio Miyagawa. But core-core CPI, which excludes food, energy prices, drops 1.0% vs 0.9% decline in August, "meaning overall prices are under downward pressure due to weak demand." Adds "I believe the current price trend will remain the same until sometime in 2011 at least because we can't expect any near-term pick-up in domestic demand. And I think the BOJ has a similar view. It's difficult for anybody to expect that prices will start rising by next year." Says BOJ may extend fundraising relief program for a month or two past December and unlikely to raise its rates from current 0.1% now; "I don't think the BOJ would take additional easing measures other than keeping rates low after it terminates its fundraising relief programs."