Carry Trade Posts on Forex Blog
RBA Joins Wait and See Crowd, Holds
Aug 4, 2008
The Reserve Bank of Australia has officially joined the tide of wait and see.
As expected by just about everyone, they held rates steady at 7.25%.
But despite early market anticipations for a rate cut by October, and a slew of negative economic data, their statement remained considerably hawkish.
"The rise in Australia’s terms of trade that is currently occurring is...adding substantially to national income and ability to spend. At the same time, high prices of oil and a range of other commodities have added to global inflationary risks. They are also dampening growth in a number of countries."
Note the 'other countries' comment. Clearly, the RBA remains convinced Australian commodities will remain a source of growth forth foreseeable future.
As most expected, the RBA did caution on growth.
"The evidence is that the tightening in financial conditions, in conjunction with other factors including rising fuel costs, and lower asset values, has restrained demand...credit expansion to both households and businesses has slowed significantly. Surveys suggest a softening in business activity, and there have also been some early signs of an easing in labour market conditions."
Like Europe and so many other countries, the Australians are starting to see signs of a slowing economy. Nevertheless inflation remain s a concern for the short term.
"On balance, however, it is looking more likely that demand will remain subdued, and economic growth will be fairly slow, over the period ahead. Inflation is likely to remain relatively high in the short term, with the CPI affected by high global oil prices. Looking further ahead, inflation in both CPI and underlying terms is likely to decline over time, given the outlook for demand, provided wages growth remains moderate. The Bank’s forecast remains that inflation will fall below 3 per cent during 2010."
Like most of the industrialized world, a conundrum of sorts has formed. Caught between inflation pressures and early signs of a slowing economy, the RBA must wait for a clearing of the economic waters.
Welcome to the world of wait and see Governor Glenn Stevens.
Carry Trade, AUD, Aussie, RBA, Reserve Bank of Australia
Forex Events June 22 - June 25
Jun 22, 2008
This week will be dominated by US data. The key mover may be comments from the Fed rate decision at 2:15pm est Wednesday.
Events Monday and Friday are clearly Euro positive, Greenback negative. Watch for the Euro to test the 1.5800 resistance on Monday. If it finally breaks the range, we could see an end to the sideways trading of the last few months as the ECB is definitely going to hike rates July 3rd.
New Zealand and Japan, 2 key parts of the carry trade, report significant data late Wednesday evening. Surprises on either side could be an omen for future carry trade volatility.
All times eastern standard time
Monday June 23
4am German IFO - Current and Expectations
4am Euro-zone PMI Services (expect 50.4)
4am Euro-zone PMI Manufacturing (expect 50.2)
Tuesday June 24
4am Swiss UBS Consumption Indicator
9am Case Shiller Home Price Index (expect 168.8)
10am US Consumer Confidence (expect 56.7, a 16 year low)
7:50pm Japan Trade balance (exclude services)
Wednesday June 25
8:30am US Durable Good Orders (expect -0.9% excluding transport)
10am US New Home sales (expect 530k, a flat reading)
2:15pm Fed Rate Decision (expect hold at 2%)
6:45pm New Zealand Current Account (expect -7.5%)
Thursday June 26
7:30am US fed Vice Chairman Speaks at ECB
8:30am US Q1 GDP finalized (expect 1.2% from initial 0.6%, thats big folks. Note, upgraded from 0.6% to 0.9% previously)
10am US Existing Home Sales
6:45pm New Zealand Q1 GDP (expect 2.1%)
6:45pm New Zealand May Trade Balance (expect +150million)
7:30pm Japan CPI
7:50pm Japan Retail Trade (Domestic)
Friday June 27
2:50am France GDP (expect 2.2%)
4am Euro-zone Current Account
4:30am Great Britain Q1 GDP (expect 2.5%)
10:00am US university of Michigan Consumer Confidence (expect 56.8)
European Central Bank, CPI, Carry Trade, trade balance, housing, upcoming reports, consumer confidence, durable goods, Fed, IFO
Quick Pips: JCB Holds at 0.5%, Carry Trades Off
May 20, 2008
As expected the Japanese Central Bank held interest rates steady at 0.5% overnight. Despite the bank's desire to raise rates, fears of a looming international slowdown held policy makers in check.
The global slowdown echoed through out the currency markets Tuesday. High energy prices, sluggish profits, and inflation fears are leading forex traders away from the carry trades. New Zealand, Australia, and Columbia where all notably off. Conversely, the Yen - the grandfather of all carry trades - was up despite the JCB holding firm.
Bank of Japan, Carry Trade, interest rates
As Volaitility Eases, Carry Trades Increase
Apr 28, 2008
The DailyFX.com Carry Trade Index rose $296 (0.01%) to end the week at $28,414. Forex traders are taking note of the calmer markets, as carry trades have been increasing while volatility decreases.
However, many traders are concerend that high yielding currencies such as those in Australia and New Zealand will soon have to follow suit with rate cuts. As a result, the narrower trades (such as USD/JPY and GBP/JPY) have been increasing while the upper end of the curve has been falling.
Read more at Yahoo
JPY, Carry Trade, USD
