Over and over, financial news airwaves are filled with noise about since the Bank of Japan–under the supervision of Governor Kuroda–has embarked on a massive dose of Quantitative Easing, there has been no real outflow of YEN around the world. The only problem with this bloviating is that its devoid of fact. The BOJ’s action, or rather, call to action has led to a drop in European bond yields as well as a new pillar of support for U.S. Treasuries. Further proof is last night’s employment data from Australia, which was much weaker than expected (a 36,000 job loss and a 0.2% jump in the unemployment rate to 5.6%), but the AUSSIE DOLLAR rallied after an initial selloff as Japanese investors are seeking higher returns. A favorite place for higher yields for Japanese seekers has been Australia and New Zealand. Many financial institutions offer what are known as Urudashi and Samurai bonds. These are bonds issued in Japan in foreign currency of usually kiwi and Aussie. Those who say that the Japanese don’t invest afar and remain in Japan–what is called HOME BIAS–are badly misinformed.
Posts Tagged ‘U.S. Dollar’
Notes From Underground: Four Central Bank Meetings, and, Oh Yeah, the Fiscal Cliff
December 2, 2012The weekend news was rather sparse as the Greeks got their trust fund check from the overlords in Brussels. The Greeks need to be leery of Eurocrats bearing gifts. The Sunday news shows in the U.S. highlighted the vast chasm between Speaker Boehner and Secretary Geithner. There was finger-pointing all around about as to which group was holding up the negotiations as to affect genuine compromise and a resolution to the fiscal cliff. As the rhetoric heats up, the S&Ps and global stock indices all closed higher on the week, showing that the price action speaks louder than words. The market has fears that failure to resolve the fiscal crisis will result in a new U.S. recession and will also undermine the global economic recovery, but yet the COPPER closed above the 200-day moving average for the first time in many weeks. Other industrial metals also performed well last week making me wonder if all the fiscal cliff rhetoric is missing some larger picture. We will watch to see if the COPPER can sustain its recent strength or whether we are in the midst of a short covering rally.
Notes From Underground: Today Was International Central Bank Day (Very Little to Celebrate)
March 8, 2012First with a hat tip to RF for e-mailing the JOKE of the DAY:
Overheard in the Athens Airport:
Greek Immigration Official:Nationality?
Tourist: German
Greek Immigration Official: Occupation?
Tourist: No. Just On Holiday
Notes From Underground: Yesterday Don’t Matter If It’s Gone
March 1, 2012Wow! Wednesday’s market reaction to words not said was extraordinary. The LTRO went very much as expected and the selloff in the EURO was in step, but the reaction of the GOLD and SILVER to unspoken words was quite unusual. Many questions were raised as to the market reaction. The GOLD sell off is rational if the premier haven was elevated simply on the belief of further easing by the FED.
Notes From Underground: The Markets to Bernanke–CAN YOU HEAR ME NOW?
January 29, 2012Post-FOMC meeting it seems the FED move is fraught with all types of dangers as the even all the bitterness and acrimony flowing out of the loose lips of EUROCRATS could not prevent a slide in the U.S. DOLLAR. FED AGGRESSIVENESS AND ITS FINANCIAL REPRESSION TRUMPS THE LUNACY THAT IS EUROPE. It is apparent that the FED‘s policy is to push U.S. rates lower across the entire curve–WE KNEW THAT–and to get ahead of any political criticism that is surely to arise as Chairman Bernanke appears before the House Budget Committee on Thursday. Paul Ryan will certainly give Mr. Bernanke a difficult time as the republicans will want to make the FED and its policies part of the election debate.
Notes From Underground: Is the Euro the New Funding Currency For the Carry Trade?
January 5, 2012For many years the carry trade has been the mainstay of the RISK-ON profile. For some periods the ZERO INTEREST RATE POLICY of Japan forced money out of its system and in search of high-yield currencies in Australia, New Zealand, Brazil and other attractive venues. One of the best carry trades ever was LONG BRAZILIAN REAL/SHORT YEN as investors could fund the trade by borrowing YEN at very low rates and placing it in high yielding Brazilian bank accounts. As the Brazilian currency attained status as a commodity currency and, thus, a proxy for the China growth story, the BRAZILIAN REAL soared and the carry trade was a major win/win. When the U.S. FED went to an extreme low interest rate, the U.S. DOLLAR became a funding currency as the U.S. became a much less attractive place for global capital flows.
Notes From Underground: SPANISH MISSTEPS TRIP UP ITALIAN DEBT
November 15, 2011TO OUR READERS: WE’RE REISSUING LAST NIGHT’S PIECE AS MANY OF YOU DID NOT RECEIVE THE POST BECAUSE OF A WORDPRESS GLITCH. ENJOY!
The DEBT markets in Europe renewed the sombre tone of a collapse of Italy and Spain. In the early part of the European trading day, the Italian BTP was holding on to last week’s gains and outperforming the BUNDS to the upside. As the day wound to a close, the “negative” news out of the Merkel’s CDU conference pressured the DEBT markets as new fears arose that the German Chancellor had her party’s support for the jettisoning of some of the weaker peripherals.
Notes From Underground: SPANISH MISSTEPS TRIP UP ITALIAN DEBT
November 14, 2011The DEBT markets in Europe renewed the sombre tone of a collapse of Italy and Spain. In the early part of the European trading day, the Italian BTP was holding on to last week’s gains and outperforming the BUNDS to the upside. As the day wound to a close, the “negative” news out of the Merkel’s CDU conference pressured the DEBT markets as new fears arose that the German Chancellor had her party’s support for the jettisoning of some of the weaker peripherals.
Notes From Underground: Charles Evans Stars In LONESOME DOVE
November 3, 2011The markets initial reaction to the FOMC statement was perplexing as the financial media reported the FED to be hawkish for there was nothing explicit about a potential QE3 program. Readers of this BLOG were well aware that the consensus was for no change from the FED as it would have been difficult to announce any new program with the G-20 meeting this weekend in Cannes. The BRICs have already accused the U.S. of causing havoc in world currency markets by utilizing its monetary policy as a “stealth devaluation” of the U.S. DOLLAR. It seemed though that the FOMC statement was DOVISH because the previous three dissenters all voted with the majority–there was a lone no vote and that came from Chicago FED President Charles Evans.
