Market Rumours

GBP/USD just dipped below 1.50 for the first time in 9 months but Barclays Capital still sees more pain ahead. The bank says in the absence of a recovery above 1.5425 the downtrend should extend to 1.4855 and 1.4685 in March. GBP/USD now at 1.5005.

USD/JPY up slightly due to bargain hunting by Asia investors, but unlikely to rise above 89.50 amid concerns over U.S. economic outlook, says Tokyo Forex & Ueda Harlow FX manager Yuzo Sakai. Notes many investors expect U.S. ISM's manufacturing business index due later in day to turn out weak, which could further dampen speculation of near-term policy rate hike by Fed; "Some investors seem optimistic about the dollar, but it's unlikely the dollar will extend its climb." USD/JPY last 89.09, up from session low of 88.70.

1-month ATM USD/JPY implied volatilities rise tad to 11.60% from 11.45% Friday in New York, on slightly higher demand for USD downside hedges following fall in USD/JPY to near 4-week low at 88.70 in early Asia morning trade. One player buys 1-year ATM USD/JPY straddle option with implied volatility of 13.90%, face value around $30 million, option dealer at major Japanese bank says. But volatilities may not move much for rest of week, as players refrain from active trading ahead of U.S. non-farm payroll report for February, due Friday, dealers say.

IMM commitment of traders report shows net JPY long non-commercial positions vs USD fell to 1,717 contracts in week to Feb. 23 vs 13,915 contracts in week earlier; trimming of JPY longs came as U.S. Fed hiked discount rate by 25 bps to 0.75%, pushing spot to five-week high of 92.16 on Feb. 19. But dealers say market participants may have bought back JPY longs since, as Fed Chairman Bernanke, other officials quickly moved to squash speculation discount rate hike suggested broader nearer-term monetary tightening; also U.S. economic data continue to send mixed signals, which could further benefit JPY, particularly if non-farm payroll report for February, due Friday, paints bleaker picture of jobs market, dealers say.

USD/JPY may rise slightly on short-covering, but any gains likely capped at 89.30 vs 88.92 last, says Hiroshi Maeba, executive director of foreign exchange trading at Nomura Securities. Says ahead of U.S. non-farm payrolls data for February Friday, presaged by ADP jobs data for same month Wednesday, "there's some anxiousness that may weigh on the pair." Tips EUR/JPY in 120.50-122.00 range vs 121.32, EUR/USD in 1.3600-1.3700 band vs 1.3630.


The global financial system is radically flawed and radical solutions are needed, so regulators must resist attempts to dilute proposed reforms, a top European watchdog said on Monday.The worst market turmoil since the Great Depression has sparked a fundamental rethink of how banks and markets are supervised following the failure to spot the risks that led to the financial crisis.But regulators fear the process could lose momentum as the world economy recovers and critics try to water down the proposed measures."A lot of proposals for more stringent capital and liquidity requirements are currently up for consultation, but they are already meeting a lot of pushback from banks and politicians," chairman of the Dutch markets regulator, Hans Hoogervorst, said at a conference in Australia.His host country's central bank added its support to proposals for banks to hold more capital on their balance sheets against potential losses, even though the ideas have met with a cold reception from local lenders, which sailed through the global financial crisis nearly unscathed.Hoogervorst said there was considerable risk that future leverage ratio requirements would be both too low, and non-binding if objectors got their way."There is already huge resistance against this proposal," Hoogervorst told the conference, run by Australia's corporate regulator, the Australian Securities and Investment Commission.