Pacific Currency Forecast – 4 May 2009
May 4th, 2009 Posted in Aussie - Kiwi, In-Depth Analysis
JPY
This past week the JPY saw significant weakness against the major currencies as reduced risk sentiment sunk the Yen. Despite swine-flu influencing global health concerns, a rise in equity markets and better than expected financial results have helped raise the appetite for riskier currencies. This in turn has hurt the Yen as a risk haven asset. However, larger numbers of infected individuals could reverse this trend.
As expected, the Bank of Japan (BoJ) held their interest rate near 0%, though the BoJ did announce cuts in its forecasted GDP amid a further deteriorating Japanese economy. The Yen ended the week against the Dollar at 99.09 from 97.15. Versus the EUR, the Yen also finished lower at 131.52 from 128.67. Against the Pound the Yen was weaker at 142.62 from 147.89.
Liquidity will be light this week during Japanese trading hours as the country celebrates “Golden Week”. Banks will be closed a majority of the week. This could send volatility higher and make prices perhaps more unpredictable. Limited economic data will be released from Japan, so traders may look for the market movers to be the release of U.S. bank stress tests and an interest rate decision by the European Central Bank (ECB). We could see the Yen trading higher this week if the stress tests show the potential for further capital injections for U.S. banks. An expected quantitative easing program by the ECB in addition to further rate cuts may help the Yen. Look for the USD/JPY to trade near the 97.85 level, the EUR/JPY near the 125 mark, and the GBP/JPY at 141.
AUD
The Aussie Dollar fared well with an increase of risk taking in the forex market. Minimal data releases occurred this past week; however, on Tuesday, the Royal Bank of Australia (RBA) will meet. The bank is expected to hold interest rates steady at 3.00%. We could see the AUD trading lower against the Dollar, close to the 0.7200 point.
NZD
As forecasted, the Reserve Bank of New Zealand (RBNZ) cut its benchmark rate by 50 basis points to 2.50%. This sent the NZD higher against the majors. Also helping was the added risk taking in the market, though the NZD/USD finished almost unchanged at 0.5708 from 0.5724. This coming week could see a reversal of this trend as Friday will have the release of U.S. Non-Farm Payrolls. A better than expected jobs report could hurt the NZD/USD below the 0.5550 mark.
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Tags: AUD forecast, AUD/USD, Aussie, Forex Trading, JPY forecast, Kiwi, NZD forecast, NZD/USD, pacific currencies, trading strategies, USD/JPY, yen
