31 Jan 2014
Flash: EM FX calmer post CB moves - BTMU
FXstreet.com (Barcelona) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ notes a welcome air of relative stability is evident across the EM FX space this morning with perhaps a realisation that while the measures taken by central banks this week may not prove sufficient, the steps were at least in the right direction for restoring stability to foreign exchange rates.
Key Quotes
"It is still way too early to conclude that this episode of volatility is behind us and hence there are still risks that the yen could lurch higher."
"Liquidity was not the best during the Asian trading session with much of Asia off to celebrate Chinese New Year. Tokyo was open though and we had the inflation data released with the nationwide data indicating continued upward price pressures while the Tokyo data came in a bit on the weaker side. The core nationwide annual inflation rate increased from 1.2% to 1.3% in December. However, the core-core Tokyo annual CPI rate remained unchanged at 0.3%, in contrast to an expected rise."
"While (Japanese) inflation data tends to grab the attention of late, we would probably put more emphasis on the jobs data. The unemployment rate plunged from 4.0% to 3.7% while the job-to-applicant ratio jumped from 1.00 to 1.03. That was the highest level since September 2007."
"The unemployment rate is just 0.1-point above the low reached in 2007 and if surpassed would take the unemployment rate to levels not seen since the end of 1997. Clearly, ‘Abenomics’ is lifting employment in Japan and what should naturally follow is higher nominal wages."
"1997 marked a turning point in wage growth in Japan in being the last year when nominal wages averaged closer to 2.0% rather than the non-existent or falling growth that prevailed from 1998 onwards. If labour market dynamics were to soon return to conditions that prevailed prior to 1998, it would significantly raise the probability of stronger nominal wage growth."
Key Quotes
"It is still way too early to conclude that this episode of volatility is behind us and hence there are still risks that the yen could lurch higher."
"Liquidity was not the best during the Asian trading session with much of Asia off to celebrate Chinese New Year. Tokyo was open though and we had the inflation data released with the nationwide data indicating continued upward price pressures while the Tokyo data came in a bit on the weaker side. The core nationwide annual inflation rate increased from 1.2% to 1.3% in December. However, the core-core Tokyo annual CPI rate remained unchanged at 0.3%, in contrast to an expected rise."
"While (Japanese) inflation data tends to grab the attention of late, we would probably put more emphasis on the jobs data. The unemployment rate plunged from 4.0% to 3.7% while the job-to-applicant ratio jumped from 1.00 to 1.03. That was the highest level since September 2007."
"The unemployment rate is just 0.1-point above the low reached in 2007 and if surpassed would take the unemployment rate to levels not seen since the end of 1997. Clearly, ‘Abenomics’ is lifting employment in Japan and what should naturally follow is higher nominal wages."
"1997 marked a turning point in wage growth in Japan in being the last year when nominal wages averaged closer to 2.0% rather than the non-existent or falling growth that prevailed from 1998 onwards. If labour market dynamics were to soon return to conditions that prevailed prior to 1998, it would significantly raise the probability of stronger nominal wage growth."