Japanese yen experiences turbulent trading

The movement of the Japanese yen has been quite turbulent today, as the currency was hit first by the Bank of Japan’s survey of corporate activity showing that confidence in the sector is dropping at a record pace, to reach its lowest point ever in the first quarter. Companies stated that the domestic market had a bleaker outlook than the foreign market.

Later the yen quickly recovered ground after news that the White House was prepared for the bankruptcy of Chrysler, but retreated slightly when an administration official reported it was inaccurate.

The BOJ is expected to meet next week to discuss the tankan (a quarterly poll of business confidence) and deflation, with speculators believing that the central bank will maintain its 0.1 percent interest rate.

Sterling / euro flat on the day

Yesterday proved to be a flat day for trading ahead of the G20 summit that kicks off in London today. The quiet trading for GBP/EUR came despite the FTSE 100 finishing the quarter on a positive note, rising by 4.3% and ending its worst first quarterly performance since its inception in 1984. It was also revealed that Gfk NOP’s Consumer Confidence Index stood at -30 in March, a rise of five points from February. This was an unexpected rise in consumer confidence, although it is still very early days to suggest that there is any significance to this.

Within the eurozone, Fortis revealed a larger than expected loss of €28bn after the bailout of the Belgian and Dutch bank last year. Fortis, which was part of the consortium that took part in the ill-fated take over of ABN Amro in 2007, was nationalised last year as the bank ran into serious financial trouble.

Both the eurozone and the UK release PMI manufacturing data this morning, with investors also keeping a keen eye on London and what, if anything, comes from the G20 summit.

Rallying equity markets weaken the US dollar

The pound strengthened by 0.57 cents against the US dollar yesterday as rallying stocks saw investor risk appetite improve and demand for the risky pound increase. Confidence returned to the markets at the end of the first quarter 2009 as the FTSE 100 index rose 4.3% and the S&P 500 index (US) saw the close of its best month since October 2002. In the US both the S&P/Case-Schiller Home Price Index and the Chicago Purchasing Managers Index fell more than expected whilst consumer confidence data mirrored investor sentiment and improved. There were no major economic announcements in the UK.

Early in yesterday’s trading a report from the White House suggested that the US government would allow the car giants to go bankrupt, however officials later said that this report was inaccurate, alleviating investors’ concerns.

In today’s trading the pound has continued to hold its ground, with trading remaining around yesterday’s close. Later today Purchasing Managers Index manufacturing data and Halifax house price figures are released in the UK. In the US, MBA Mortgage Applications, ADP Employment Change, construction spending, ISM manufacturing and pending home sales are released. Investors will also be watching for any news from the G20.

Euro strengthens against the dollar despite German unemployment

The dollar weakened against the euro yesterday, despite data released in the eurozone showing that German unemployment increased for a fifth month, pushing the jobless rate to 8.1%. The dollar’s losses came on the back of a rise in US stocks on Wall Street, which improved risk appetite.

This morning the dollar has recovered some ground, and may rise on the back of the G20 meeting, because a failure by leaders to unanimously agree on ways to revive the global economy could push investors to the safe haven of the greenback. Investors are also eagerly awaiting the US employment report due to be announced on Friday, which is expected to show a higher number of job losses in March in comparison to the previous month.

There are several announcements taking place in the US today including MBA Mortgage Applications, ADP Employment Change, ISM Manufacturing and Pending Home Sales. The Unemployment Rate is due to be released in the eurozone this morning at 10.00 BST.

New Zealand dollar recovers losses

The New Zealand dollar regained previous losses against sterling yesterday, as month-end and quarter-end flows improved demand for risk appetite, supporting the kiwi. Previous falls were seen after the Reserve Bank of New Zealand said interest rates had got out of line with expectations, and that it expects to keep rates low for some time. The National Bank of New Zealand business confidence survey yesterday showed sentiment in March still remain low with no signs of near term improvement.

Australian dollar regains some ground

The Australian dollar has regained some of yesterday’s losses against the pound as a rally in stocks boosted higher yielding currencies. Gains were limited due to brighter UK economic data and a boost by month and quarter end capital flows. Data yesterday showed British consumer confidence rose to a ten month high in March, as lower mortgage repayments boosted disposable income. Sentiment was also helped by Barclays, who declined to take part in the UK government’s asset protection plan, unlike Lloyds TSB and RBS.