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Overnight Yen Tumble Sends Asia Scrambling To Retaliate
The main story overnight is without doubt the dramatic plunge in the Yen, which following the breach and trigger of USDJPY 100 stops has been a straight diagonal line to the upper right (or lower for the Yen across all currency crosses) and at last check was approaching 101.50, in turn sending the USD higher in virtually all jurisdictions. However it is not so much the Yen weakness that was surprising - a nation hell bent on doubling its monetary base in two years will do that - but the accelerating response in neighboring countries all of which are seeing Japan as the biggest economic threat suddenly and all are scrambling to respond. Sure enough, midway through the evening session, Sri Lanka cut its reverse repo and repurchase rate to 9% and 7% respectively, promptly followed by Vietnam cutting its own refinancing rate from 8% to 7%, then moving to Thailand where the finance chief Kittiratt called for a rate cut exceeding 25 bps, and more jawboning from South Korea suggesting even more rate cuts from the export-driven country are set to come as it loses trade competitiveness to Japan. Asian financial crisis 2.0 any minute now?
The overall disturbance in Asia following the sharp move lower also managed to send not only the Nikkei 225 up by 2.7% but also caused a halt in trading of the JGB futures following rapid moves that sent the 10 Year up 6.5 bps to 0.655%, the highest since March 12.
The funny thing is that with Asia openly inviting inflation now, and with the populations soon once again to scramble for even more gold, the precious metal complex has continue to tumble, driven not by what is coming but by the algo correlation response to a strenghtening USD. Well, it won't be the first time the market has been 100% wrong.
In other bond-related news, Japan reported that for the first time in six weeks, Japanese investors have turned into net buyers of foreign bonds for the first time in six weeks, reversing a trend in which they had used the yen’s fall as an opportunity to sell overseas holdings and prompting further falls for the currency below JPY100. As FT reports, data released on Friday by the Japanese finance ministry showed that Japanese investors bought Y204bn more of foreign bonds than they sold in the week to April 27, then extended the buying to a net Y310bn the following week, a week in which they also became net buyers of foreign stocks. More disturbing was that US bonds were roundly rejected by Japanese investors, meaning that the bulk of purchases went into high "quality" paper such as Spanish, Italian and Greek bonds. One can't wait to see the Hollywood ending in this one.
Additional trouble for Asia came as Nomura joined the loud calls now emerging from everywhere that due to its now confirmed data manipulation, that Chinese growth in January through April was likely overstated, which means that inflation accelerating once more on even lower growth puts the PBOC truly in a very dead end position. This even as April M2 growth soared the most in two years.
Finally, a quick look at Europe, showed that economic data was as usual abysmal with Italian March industrial production falling -0.8% on expectations of a -0.3% drop, with the February number revised from -0.8% to -0.9% perhaps the show improvement? UK construction output plunged -7.4% Y/Y, on expectations of "only" a 6.6% decline with the prior revised to -5.5%. Although it was the Italian 1 Year Bill auction that raised some eyebrows - despite the yield falling to a record low of 0.703%, the Bid to Cover of 1.16 dropped to just 1.16, the lowest since February 2012. Is the carry trade close to reversing, and if so where will all that Japanese hot money end up?
Full recap bulletin of events courtesy of Bloomberg:
- JGBs tumbled, with 10Y yields headed for their biggest jump since 2008, after the yen weakened below 101 per dollar equities surged
- Japanese investors were net buyers of foreign bonds during the week ended May 3 according to figures released by the Ministry of Finance in Tokyo Japanese investors sold a net 200.1b yen of Treasuries in March, longest streak of net selling since Sept. 2008
- German Finance Minister Wolfgang Schaeuble signaled support for an easing of Europe’s austerity drive on the eve of a meeting of G-7 finance minister and central bankers in London
- G-7 meets today and tomorrow; split agendas hamper united policy, analysts say
- Global central bankers are poised to ease monetary policy even further after a wave of interest-rate cuts from India to Poland; South Korea’s rate cut yesterday was 511th reduction since June 2007, according to BofA
- U.S. won’t hit debt limit until at least after Labor Day (Sept. 2), Treasury Secretary Jack Lew said in CNBC interview; analysts see headroom until 4Q for Treasury to delay hitting debt ceiling given tax receipts, reduced spending due to sequester, Fannie Mae’s $59.4b dividend payment
- BofAML Corporate Master Index OAS steady at 143bps, new tight for 2013, as $5.65b priced yesterday. Markit IG at 70bps, YTD low 69bps. High Yield Master II OAS narrows to 423bps, new tight since 2007, as $2.65b priced. CDX High Yield falls to 106.96 from record 107.37
- Sovereign yields mostly lower, led by Japan. Nikkei surges 2.9%, Shanghai +0.6%. European stocks and U.S. stock-index futures rise; WTI crude, gold, metals lower
SocGen on the main macro events to keep an eye for:
The takeaway from this week is that central banks, whether based in developed or emerging markets, continue to show active engagement in battling the headwinds from slowing demand and slowing inflation, and those with the fortunate nominal capacity to cut rates are not wasting much time in easing monetary conditions. Poland and the Bank of Korea cut rates this week confounding market expectations, as did the RBA in the G10. Our EM strategists are calling the Bank of Thailand will follow soon, and in China, the PBoC effectively also eased by lowering 3-month funding levels from 3.05% to 2.91% via PBoC bills. The big ease is on and most are taking advantage of the opportunity to make money by being long risk.
The gathering of G7 central bankers and finance ministers today and tomorrow in Aylesbury takes place as USD/JPY burst through 100.00. Since the gatherings in Moscow (February) and Washington (April), equities have gone on to post new highs in the US, safe havens (JPY, CHF and gold) have come under pressure and the decline in peripheral bond yields has been relentless. US officials have been pushing a more growth-oriented agenda for Europe and are seeing their wish being fulfilled as deadlines to meet deficit targets are being postponed. Solid macro data from Germany, the US and the UK, the return of Portugal to the capital markets, and a solid Spanish bond auction to boot, have cemented the rally in risk. The weekly claims data yesterday in the US in particular will have reinforced confidence that the pace of job creation is picking up, which should culminate in a strong payrolls report on 7 June. With this in mind, the back-up in US 10y yields to 1.85% (swaps 2.00%) suggests that we are leaving the May lows behind, bringing support to the USD. Buying topside strikes in USD/JPY for 7 June expiry looks a good way to take advantage of higher US yields and a firmer USD.
Commodity currencies have been under the spotlight this week after central bank decisions in Norway and Australia, and today it is the turn of the CAD. On the verge of testing parity vs the USD, the monthly employment report for April will garner close attention. Stephen Poloz was the surprise nominee to succeed Mark Carney as the next Bank of Canada governor, but he could have his work cut out pretty soon if he is to slow the ascent of the CAD. As the previous president of the Export Development agency, will Mr Poloz follow the example of the RBNZ or the RBA?
Full overnight recap from Deutsche Bank
Yesterday was a day where speculation about Fed potentially tapering QE elevated itself above the recent background noise of endless central bank liquidity. The widespread chatter came about from a tweet which noted a pending WSJ article from Jon Hilsenrath about Fed tapering. Nothing actually materialised so this could be another false twitter story that has impacted markets.
Away from this speculation we did actually see some hawkish comments from Philadelphia Fed’s Plosser (a firm hawk) who said that he would like to see the Fed begin to scale back QE beginning even as early as the next meeting. He added that the purchases are risky and offer pretty meager benefits. Note however that Plosser is a non-voter this year. These hawkish notes were somewhat countered by Chicago Fed’s Evans (a voter this year) who attributed the labour market improvement to the Fed’s asset purchase program.
The S&P 500 and the Dow closed -0.37% and -0.15% lower on the day on the tapering concerns, although a better-than-expected initial jobless claims (323k v 335k) offered some support. Eight out of the ten major sectors finished the day in the red let by a -1.6% decline in Utilities. IG credit widened 2bps in the US, perhaps a telling indicator of market positioning, and 10-year USTs closed 4bp higher at 1.811% to levels last seen in early April. Dollar strength was the other main theme as we saw the DXY index (+1.10%) gain the most in three weeks which is not helping Gold. The yellow metal fell a little over 1% yesterday to $1458/oz. We can't help thinking that if the Fed did decide to taper, then the Dollar could rip higher which in itself might be a reason that the Fed might be cautious. Its not an era where anyone really wants a strong currency with limited global growth to go round.
The Dollar strength yesterday also helped the JPY push through the 100-mark. This has given Japanese stocks another boost overnight with the Nikkei up +2.7% also on the back of stronger-than-expected current account headlines. Japanese Bond Futures have resumed trading after having hit a circuit breaker earlier due to sharp price moves. JGB 10yr futures are up nearly 8bps in yield to 1.132% overnight and have risen nearly 18bps since the April lows. Elsewhere across Asia markets are fairly mixed with the ASX 200 (+0.2%) moderately higher but the KOSPI (-1.2%) and the Hang Seng (-0.1%) lower. Asian spreads are steady as markets digest what has been a fairly eventful week of new issues. In other currency moves the AUD has also tumbled overnight to an 11-month low of 1.0085. The Aussie has fallen 1.6% since the RBA’s surprise rate cut on Tuesday.
Speaking of rate cuts, the BoE yesterday defied joining the recent trend of surprise central bank easing seen in the past week. Our own Dr. Buckley noted that the past week has seen six central banks cut policy rates: The ECB, Danmarks Nationalbank, the Reserve Bank of Australia, the Reserve Bank of India, the National Bank of Poland and, last night, the Bank of Korea which collectively represent some 23% of world GDP. The BoE’s decision was not a surprise especially given the recent momentum in UK data flow.
Today we will have trade data from Germany and the UK, industrial production numbers from Italy and the monthly budget statement from the US. All eyes will be on Bernanke though when he speaks at the Chicago Fed Conference at 2.30pm London time, especially given Thursday's tapering discussion. Elsewhere G7 Finance Ministers and Central Governors meeting will meet in Aylesbury near London today.
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I'm enjoying the weakness of these currencies.
I love the smell of napalm in the morning.
Smells like......victory.
Someday this currency war is going to end.....
http://www.youtube.com/watch?v=bPXVGQnJm0w
Great news inbe4 new all time highs for s&P500 and DJIA. BUY BUY BUY
On another note what else could possibly go wrong ?
here we go again..
http://www.loti.com/transistor_radios_the_fifties.htm
Dow rallies overnight on "strong" dollar. Dow rallies overnight on "weak" dollar. Dow rallies. World markets rally. Mars rallies. Tralfamadore rallies.
I rove the smerr of naparm in the morning.
Smerrs rike victory.
WoW! Whata difference a day makes...
From:'Is Abenomics Going To Put Japan Back On The Map?'
http://www.zerohedge.com/news/2013-05-09/guest-post-abenomics-going-put-...
To: 'Overnight Yen Tumble Sends Asia Scrambling To Retaliate'...
Japan is working toward the creation of a Greater East Asia Co-Prosperity Sphere.
and the neighbors are getting snarky:
... moving to Thailand where the finance chief Kittiratt called for a rate cut exceeding 25 bps ...
KittyRat: Thailand's counter to Japan's HelloKitty!
The economic insanity of living in a world where governments openly devalue the peoples currency while saying its for their own good.
Oh...and this didn't take long...Lautenberg of course:
http://www.govtrack.us/congress/bills/113/s792/text?utm_campaign=govtrack_email_update
And the sheep bleat about the benefits of inflation while ignoring their lose in wages. Nominal versus real is something many won't understand until it is too late.
hammer down!
Currency wars, bitchez!
Wrong to be long the dong again.
Price inflation should really help with demand. [/sarc.]
Japanese investors have turned into net buyers of foreign bonds for the first time in six weeks...
#WINNING!
It is morning so gold and silver must be attacked even as Japanese instability skyrockets
Most likely gold is being attacked because this is a serious problem.
Massive inflation in developing countries will force them to buy gold and silver even as the Fed attacks them.
Japanese pension funds had 0.03% of their $3.36 trillion in gold and that is turning out to be a mistake with the yen collapsing.
When it gets serious, you have to attackBut realistically, the paper market wanted to test 1425 for its own algo purposes. It always wants to try and restest a low. So it would probably at least get one 38% fib retrace before legging up again.
So paper still wags the phyz?
BINGO.
But you're not allowed to say that here.
No more golden Kool-Aid for you, pal.
I think that the paper market is for hedging and it is no longer useful to hedge at these prices.
it's not only gold, all commodities get whacked.
When the USGB's start to dump, watch out below. It's rather amusing to see the USD strengthen, UST's Yields rise, equities rise, and PM's fall.
And look what is happening to Au and Ag.
Don't just look at it.....buy it.
Wrong is right.....up is down.....and fiat is fake. The last resort is to throw fake money at anything of value....it's not like it's costing them anything.
When the fire dies down...they can just walk back in the room and pick it back up.....old Rothschilds trick.
Those who cannot remember the past are condemned to repeat it - George Santayana
Yup, and just for fun mix in a rumor of a possible article of the faint possibility of QE ending by 2030 and you can just add downside momentum anytime you want.
2030? Thank goodness.....I still have time!
paper prices don't mean shit. go to your local dealer and let me know if they'll sell to you at spot.
silver? absolutely not. It's still clinging to $30. something is crazy there.
Gold? My guy has plenty. I will be able to get it today, my guess...in the 1470's. He will probably buy it back slightly above spot if i wanted to sell, which i don't.
depsite all these fantastic articles, GOLD paper and physical prices are still within their usual spot plus premium range, and dealers seem to have plenty of inventory, despite large volumes of biz being done.
I am not switching teams or any stupid crap, just calling a spade a spade.
Datz raciss!
But yea, we are wobbling on a high wire... in a hurricane.
What's everyone worried about? The G8 and/or G20 promised they wouldn't devalue their currencies for economic benefit.
Maybe they should call it the G69.
Ben Shalom promised us that under oath......but we didn't hold him to it.
So .... it's our fault, then.
"LAS VEGAS—Aggressive fiscal and monetary policy coupled with structural reforms are presenting huge investment opportunities in Japan, widely followed hedge fund manager Dan Loeb said.
Speaking at the Skybridge Alternatives, or SALT, conference here, the founder and CEO of Third Point, with $13 billion under management, said the slow-moving Japanese economy is ready for a breakout.
"We're really focused on Japan," he said.
You leave that nice "Fast Money" boy alone. His direct exposure to CNBC has left him hopelessly Cramerized.
I am going to stir it up around here a bit. I'm wonder if we are deluding ourselves a bit early and back slapping and congratulating each other on things that have yet to play out. Hopefully it will make it more interesting and make everyone think.
fonz - we are ecentric, so yes some self reflection is good. talking to "normals" will reveal this(of course).
ive never been normal and don't strive to fit in, but ah,then we must be artists, then of course, true artists, ignoring norms and creating from true inner thoughts. are those inner thoughts yours and yours alone?
everyone I know thinks I am nuts so my guess is, yes, they are my thoughts alone.
It's called 'contrarianism.'
Hard to practice at inflection points, where the crowd is wrong ... but ridicules those who say what it doesn't want to hear.
If I find myself disagreeing with both crowds, where does that put me?
temporarily conflicted - the crowd is getting through, but you will filter that noise out soon eneough...
those gains you eye will be temporary. but tempting. stay the course...
imo it is a gift! humility will keeps us grounded.
and promptly admitting i may have fucked up.
add some cog. dis. understading and walla a genius.
The only thing we know for sure Fonz, is that we have no idea what the future will hold. We all make predictions and they are all wrong in some way. We can only see macro patterns of limited data and our own personal assumptions which is why we should keep an open mind even to someone such as Kruggers, who may, on occasion, have moments of lucidity and can add positively to our understandings.
Sri Lanka cut its reverse repo and repurchase rate to 9% and 7% respectively, promptly followed by Vietnam cutting its own refinancing rate from 8% to 7%, then moving to Thailand where the finance chief Kittiratt called for a rate cut exceeding 25 bps, and more jawboning from South Korea suggesting even more rate cuts
Isn't it awesome how that works?
I'm going to cut my own refi rate to -20%. All I have to do is put a gun to everyone around me's head and say it is for their own good. They'll thank me for it.
I really should have done that government thing. Who could have known it was so lucrative? And who is it that says only stupid people go there? They seem like the smartest guys in the room!
/sarc
When the yen was 80 and gold was 1600, a troy ounce of gold was worth 128,000 yen. When the yen is at 100 and gold at 1450, then gold is worth 145,000 yen.
The Japanese aren't losing a dime on gold, the value has increased by 15 percent.
If the yen goes to 120 for a dollar, gold can fall to 1200 and the gold will still be worth 144,000 yen.
Yen at 145, gold at 1000.
Looks like that is what is/might be happening.
+1 a serious gold "bug" website would always note the important currencies for gold physical markets, which are roughly in the order: Rupiee, Yuan, Yen, Euro and Turkish Lira, followed by the USD as all-important counterweight for the paper betting
You manage to continually surprise me, "Citizen" Ghordius... and that is a delightful thing!
not only with the civility of your discourse, but the breadth of your knowledge of those few things which matter anymore. I doubt that there are a half dozen here who would know what you just wrote.
As much as I am a skeptic of the Europroject... and it's chances of successfully bringing the fortunes of it's denizens out of a new 'dark age' of talmudic serfdom... you give me pause for thought... and untoward "hope" ... of a kind I'm not used to feeling... anymore. Apparently civilization is not yet completely undone, in your segment of the western world.
edit: with 3 ups already to your account... I'm forced to upwards my estimate.... perhaps there are not more than 3 dozen who would know what you wrote here... another proof - that ZH is the remaining citadel of the 'really real'!
too kind of you, then I leave happy to have contributed to your day - I actually thought I'd get a different reaction to the above - ZH astonishes me often, too
civility? - part of noblesse oblige, I'd say - I'm a citizen by choice and a "medieval predator robber baron" by blood and raising (one of my grandmothers was the near-platonic ideal of a Norman lady, for example), after all - and sometimes it shows and then I have to cover my ears from all the bleating of the lambs (and the low, deep growls from i-dog still reach me)
the Europrojects may fall a couple of times - from my perspective it's just an excuse to talk instead of reverting to spilling blood. note how I defend the current status quo here - though I do realize that most people don't even understand the concepts of sovereignty, confederation, federation and unitary states. all they really want is a big daddy looking for them
it pains me, but serfdom is in the heads of most people - and the word "Lord" means "Who gives bread". and you know that most people don't understand how banks and central banks function at all
but yes, in this part of the world the Spirit of the Citizen is strong and might carry civilization forward - even people like Nassim Taleb (from Syria) show it - in his case asking to go back to the city-states - my main bone of contention with a certain culture is that it's model is the "Baron against the King conflict" - which is not the right/civilized way of looking at things, imho
have fun
Dem unicorns ain't pooping out skittles, more like crazy pills!
guys, i dont know about you, but i am adding to my gold position every time gold falls. with all the printing, its only a matter of time before gold is at 3000 plus. gold is cheap now, and every time it falls, dont be scared, its a buying opp. u will appreciate it one day.
of course the usual stocks are up on shit, whats new? japan is easily becoming the biggest fucking joke, with its market making new intra day highs daily.
im pretty sure i remember around labor day, the nikkei was at around 9000 something, now its close to 15000 in fucking 9 months. that is not fucking normal. would anyone be shocked if the nikkei was at 25000 by years end with all there fucking printing over there?
big PM drop ahead this WE
I sense a disturbance in the Force.
And Gold gets slammed. Makes perfect sense in the land of make believe!
hammer paper down - if that is possible. sell that shit as rotation to risk - nice, gotta luv these markets, big move for stawks on tap. 30's style(germany).
The Japs are finally doing something different (joining in with the moneyprinters). They clearly cannot continue the policies of the last 20 years.
They are doing the right thing and it has given me one of the easiest trades ever. I went heavy into Japanese equties in January. I'm up almost 30%
Lots of dollar borrowings out there. Could be a scramble that sends that ole Reserve Currency on a rocket ship.
Ugly is relative. Hugh Hendry, a dollar bull, knows ugly. So does Soros (short yen, short Aussie). Love him or hate him, that old guy is the best there ever was, bar none.
It's all a good idea..........until it's not.
I can't wait to buy a brand new Lexus for $10,000. Listen folks, the Japanese have finally figured out a way to beat the Jews at their own game. Give them credit. (hahaha!!!..pun intended!)
I guess those abe-bras really do work.
All these stabilizing efforts of central banks are making me nauseous. I just wish someone would at least tell us whether the first one to puke on his shoes wins or loses this game?
i live in seattle......back yard Vietnam
MUTUAL DEBT CANCELLATION
PARTY
http://www.youtube.com/watch?v=rkZ2_nKo7II
FIRST, READ THIS AND WEEP.
http://pages.citebite.com/g1k6u2j8v2udb
Japan's Emergence From
Deep Recession Till The
Lead-Up To The American
Financial Crisis Beginning
in 2008 Was, I Believe,
Siphoned From By Investors
Smitten By The Mortgage
Bubble In The U.S. And Europe.
Now, They Face The
Repurcussions Of A Fibrillating
Export Market; And, They're
Suffering From The Ongoing
Contamination From The
Fukushima Accident, With
The Medical And Emotional
Toll From The Radiation Adding
To Their Burden And Further
Challenging Their Ability
To Recover.
Have You Ever Had An Idea
That Seemed A Little Too
Far Out To Put Forth, But
A Month Later You Thought It
Might Have Been Useful To
Have Not Been So Timid?
It May Be Possible To Identify
Concentrations Of Sovereign
Debt Owed Specific Banks
Going In Each Direction:
From The U.S. To A Japanese
Bank; From Japan To A U.S.
Bank.
If The Fed's Toxic Asset
Purchases And Free Reserve
I.V. Drip In Fact Runs To The
Subject U.S. Bank, Then That
Bank Can Be Nationalized
Temporarily And Run Until Its
Rehabilitation. The Same Can
Be Done On The Japanese Side.
Then, Tokyo's And Washington's
Bank Custodians Can Cross-
Forgive Each Other's
Sovereign Debts On An Equal
Market Value Basis. Notice, That's
Also U.S. Sovereign Debt Getting
Cancelled.
Why Is There A Benefit To The
U.S. If Debt Owed From Japan
Is Cancelled?
That's Because The Debt Owed
From Japan Would Have Run
To A U.S.-Nationalized Bank.
As To Custodianship For
A Nationalized Bank,
Frankly, Grounds For Annulling
Some Debt, Or Perhaps
Inventing A New Class Of
Bankruptcy That Leaves The
Depositors Protected, While
The Subject Bank Is
Rehabilitated, Or Some Such
Process Can Be Used.
As I Like Saying, I Don't Even
Consider Selling Ever More
Risk Protection For Ever
Greater Liabilities For Ever
Less Premiums For Ever
Greater Bonuses A
Legitimate Business.
And Actually, This Process
Would Resemble What China
Went Through When It
De-Nationalized Severely
Indebted Banks.
However, That's Not To Be
Confused With Third World
Bank Debt Relief.
That's Essentially More
Risk Filtering, With Sovereigns
Surrendering Credits While
Affording Private Banks
Stronger Positions.
I For One Would Still Support
Third World Debt Relief
Even Though The U.S.
Taxpayer Pays While The
U.S. Bank Benefits, But I
Wouldn't Want The Upshot
Being A Corrupt Partnership
Between A U.S. Firm And
An African Capital.
The Only Losers In This
Scheme Are The Owners Of
The Subject Bank Holding
Companies, Plus Those
Additional Bank Holding Co.
Owners Whose Own Taxpayer-
Backstopped Lending To
The U.S. And Japan Would Be
Slowed.
Why Do I Cap First Letters Of Each
Word Except Where Quoting?
For The Same Reason Many
News Anchors Alternate Reading
Copy Even Mid-Story.
When the yen goes into a freefall the rest of Asia will be in deep doo doo, especially S Korea. Yes Japan's output mainly overlaps with Germany but it is S Korea that took the Japan model and made it cheaper, ie they pulled a Japanese on the Japanese. All this will go away when the Yen is at 120. It might be time to get the hell out of dodge from Asia, especially countries that competes directly with Japan. I am not bullish on Japanese exporters at all, as they're just re-dividing this shrinking export pie, just saying that it is lose lose for everyone in Asia when Japan pulls this off.