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Sunday, May 26, 2013

Your forexlive.com ENewsletter

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New Zealand and China in early stages of talks to make their currencies directly convertible

Posted: 26 May 2013 12:48 AM PDT

  • New Zealand is negotiating with China to make their currencies directly convertible
  • A spokeswoman for New Zealand Prime Minister John Key said talks are in the “very early stages” and “progressing,”
  • China and Australia agreed to allow direct convertibility between the yuan and Australian dollar last month, after about 12 months of negotiations
  • The U.S. dollar and Japanese yen are also directly exchangeable with the yuan

New Zealand, China in Talks on Convertibility of Currencies (The Wall Street Journal is often gated, so if you're unable to access the article try a search of Google news using the headline)

Bank of Japan’s Kuroda speech in Tokyo Sunday – Reuters and Bloomberg articles

Posted: 26 May 2013 12:21 AM PDT

As a follow up to my earlier post on Kuroda’s Sunday speech, here’s an article now up on Reuters website reporting on it: BOJ’s Kuroda says pain from bond yield rise is manageable

Added: Also, article on Bloomberg: BOJ's Kuroda Sees No Sign Investors Too Bullish on Japan Economy

Bank of Japan’s Kuroda speech in Tokyo Sunday – main points

Posted: 25 May 2013 11:26 PM PDT

  • Kuroda says Japan’s economy has started picking up
  • Japanese banks have enough core capital to make them resilient to external shocks, including rising interest rates
  • The process to overcome deflation is also the process for the financial system to recover its vigor

“If the economy recovers and profit margins on lending improve, rising interest rates won’t much affect the soundness of banks, while the failure of the economic recovery and the emergence of concerns about fiscal reform could have adverse effects on banks.”

  • He doesn’t see excessive expectations
  • Says yield rise is negative if not led by economic hopes, its best if yield rise is based on economic expectations
  • BOJ’s easing is to lower yield curve & risk premium
  • He doesn’t see major problem with Japan’s financial system and expects japan’s recovery around the middle of this year
  • Need to change inflation expectations to achieve 2% target
  • The credibility of the BOJ won’t recover unless deflation is ended
  • And that excessive risk-taking can destabilize financial system

Nothing new from Kuroda in this speech. Given the volatility in the yen last week, I expect a volatile opening Monday in the New Zealand morning.

CFTC: Sharp increase in bets against the euro and Australian dollar

Posted: 25 May 2013 09:10 AM PDT

Futures market speculative positioning data from the CFTC as of the close on Tuesday:

  • EUR net short 80K vs short 46K prior
  • JPY net short 95Kvs short 88K prior
  • GBP net short 77K vs short 65K prior
  • AUD net short 32K vs short 13K prior
  • CAD net short 34K vs short 44K prior
  • NZD net long 18K vs long 23K prior
  • CHF net short 19K vs short 15K prior
  • Dollar Index net long 46K vs 35K prior

The weekly Commitments of Traders data showed a jump in euro shorts. The new positions were established after May 14 almost any position established since then is underwater which makes me believe there is a real chance of a short squeeze above 1.30.

What has been more remarkable is the swing in Australian dollar positions over the past two months. AUD longs were over 80K and now the market is holding a massive short. The articles earlier today show how quickly and aggressively everyone has swung against the Aussie dollar. I can’t remember the last time sentiment on a currency changed so dramatically.

Thanks to @samueldunlopfx and Jacek Wierbicki for helping me track down the data from the road.


at 5:03 PM

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