Will USD/JPY Rise after Japan Sovereign Debt Rating Cut?
By W+W Research
(eToro Blog) The credit rating agency Moody’s has cut Japan’s sovereign debt rating from Aa2 to Aa3 with a stable outlook. The reasons cited by Moody’s were Japan’s budget deficits, the March 11 earthquake and the subsequent nuclear crisis and the frequent change of government. Outgoing Prime Minister Naoto Kan said that the debt rating downgrade was “regrettable.” Finance Minister Yoshihiko Noda is expected to hold a press conference today to discuss the recent rise of the Yen. The USD/JPY did not move much on the news but we expect this move by Moody’s to help the Japanese achieve a weaker Yen in the long run. Earlier Minister Noda said, “I will not comment on the actions of a private rating agency. The smooth sales of Japanese government bonds at recent auctions show that confidence remains unshaken.”
New Zealand reported monthly trade surplus in July to the tune of NZ$129 million. The number came well above analysts expectation of a trade deficit of NZ$125 million. The trade balance for month of June was revised down to NZ$197 million. In July imports were New Zealand imported NZ$3.59 billion worth of goods and exported NZ$3.72 billion worth of goods. Milk powder, butter and cheese exports led to the surplus along with weaker imports. Analysts had expected exports to decline based on seasonal fluctuations. The Reserve Bank of New Zealand cut rates in an emergency meeting in March by 50 basis points to bolster the economy after the deadly earthquake in Christchurch. In the July meeting, the RBNZ commented that it sees little need to keep rates at such low levels for much longer and hinted at raising rates. However, with today’s weak imports (slower demand domestically), analysts think that the RBNZ might not rush to raise rates anytime soon. The NZD/USD is trading down around 0.8310 on depressed interest rate concerns. We expect Kiwi bulls to unwind their speculative long positions and the pair to drop to 0.8000
The Australian CB Leading index declined by 0.8% based on declining building approvals, shrinking money supply and sluggish stock markets.
Asian markets are mixed for the day with the Nikkei at 8,741; the Australian S&P ASX at 4,277, the Hang Seng Index at 19,732 and the Shanghai index at 2,680.
Copyright 2011 eToro BlogNote: Past performance is not an indication of future results. This post is not investment advice. CFD trading bears risk to your capital.