FOPLADE- "Haremos todo lo que esté a nuestro alcance por Haití"
Entrevista a Leonel Fernández, presidente de República Dominicana, tras el terremoto que devastó al vecino Haití

IBAN CAMPO | Santo Domingo 18/01/2010


Leonel Fernández, presidente de República Dominicana, es el primer mandatario que visitó Haití tras el terremoto del pasado 12 de enero. En vísperas de la cumbre de donantes que se celebra hoy en el Palacion Nacional, ha repasado con EL PAÍS algunos aspectos de la tragedia y del futuro de Haití.


Pregunta¿Cómo analiza la situación cinco días después del terremoto?

Respuesta Ha sido una tragedia y en estos últimos días se han descubierto otras áreas afectadas. Originalmente, la distribución era lenta, se carecía de una estructura organizativa con la que distribuir a la población alimentos, agua potable, medicamentos. Eso está mejorando, como la utilización de equipos pesados para remover escombros y encontrar heridos rescatables. Era difícil movilizar todos los recursos internacionales. Pero hay que recordar que, al quedar suspendidas las comunicaciones internas, el Gobierno quedó desconectado. El presidente (René Préval) no tenía teléfono para conectarse con los ministros. Sobre la marcha se ha ido creando una estructura organizativa, y con toda modestia, República Dominicana ha jugado un papel clave con la Minustah (la Misión de Paz) en la fase inicial para poder atender las necesidades iniciales de la población.

P. ¿Qué ayuda específica presta su país a Haití?

R Somos los vecinos más próximos, compartimos la isla, hay un vínculo natural con Haití, al que estamos obligados a socorrer en caso de necesidad, como ha ocurrido ahora. El aeropuerto de Puerto Príncipe puede haberse desbordado y alguna ayuda tiene que pasar primero por la República Dominicana y ahí nuestro territorio es utilizado, sobre todo a través de la comunidad de Jimaní, para que las ayudas lleguen.

P.¿Hasta dónde puede llegar el apoyo dominicano?

R. Uno no sabe exactamente, si lo que está por venir es mayor que lo que hemos hecho. En los próximos días veremos hasta dónde podemos llegar, pero estamos dispuestos a colaborar en todo lo que esté a nuestro alcance para socorrer al hermano país de Haití.

P.Hasta ahora ha habido un éxodo a cuenta gotas, mayormente de heridos y de haitianos que viven fuera. ¿Teme que esto cambie en los próximos días?

R.La impresión que tengo es que no se convierte en un desafío o amenaza inmediata. En Puerto Príncipe no vi gente interesada en cruzar para aquí, más que los heridos que necesitan atención. Se ha planteado un campo de damnificados, pero del lado de Haití. El Gobierno brasileño ha montado tiendas de campaña de aquel lado, que es donde los haitianos quieren estar por proximidad con los suyos, con sus familias, relacionados. No ausentarse.

P.¿Han tomado alguna medida extra en la frontera?

R.Hemos creado una unidad de apoyo logístico en Jimaní, pero no hemos visto señales de ese éxodo masivo que en los medios se insinúa o se sugiere.

P.¿Qué consecuencias cree que habrá a corto plazo para República Dominicana?

R. Seguir con la ayuda y facilitar su paso, y la atención hospitalaria. Esas son consecuencias inmediatas. Ahora bien, a pesar la tragedia, lo ocurrido puede convertirse en una oportunidad para que la comunidad internacional, por vez primera, haga un compromiso con el futuro de Haití, y siento un gran interés en contribuir para diseñar un plan de acción que permita proveer la asistencia técnica y financiación requeridas para que Haití pueda dar el gran salto hacia delante, que ya hoy día se entiende en todas partes que no puede seguir anclado en el siglo XIX cuando se ha entrado en el mundo de la modernidad.

P. ¿La reconstrucción de Haití puede ser un incentivo de regreso para aquellos que acostumbran a buscar su futuro en este país?

R.Los procesos de desarrollo toman tiempo y, aún con el apoyo internacional, tomará tiempo que Haití salga de su estado de abandono y miseria. En la medida en que, con el tiempo, logre progresar, la migración tendrá un incentivo menor y la República Dominicana ya encontrará las formas de hacer frente a las áreas laborales en las que participan los haitianos. El futuro lo irá indicando.

P.¿Alguna medida contra las epidemias?

R. Con el ministro de Salud hemos hablado de medidas preventivas para frenar a tiempo cualquier epidemia que se pudiera suscitar como resultado fundamentalmente de los cadáveres insepultos y nuestro ministerio está tomando medidas tanto en Haití como en República Dominicana para llevar a cabo estas medidas.

P. Usted estuvo con el presidente Préval dos días después del terremoto. ¿En estos días se ha imaginado en su lugar? ¿Para usted fue duro verlo como lo encontró?

R. Sumamente. Estaba desbordado por los acontecimientos, carente de recursos, incomunicado con su Gobierno, afectado en su propio hogar. Estaba atravesando unas condiciones inenarrables. Pero, al mismo tiempo, cuando vio nuestra llegada y cuando ha visto al mundo volcarse con su país, sabe que no está solo, que lo mejor del espíritu humano sale en estos momentos siempre en dirección de hacer una gran contribución. De manera que de la tragedia salen las oportunidades, de la oscuridad surge el amanecer y lo que hay siempre que tener, aún en medio de la desesperanza, es optimismo de que del futuro será mejor.


EL MUNDO Y LAS FINANZAS.

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QUIET MARKETS ON US HOLIDAY

-US holiday, but markets starting off week on positive footing.
-CFTC data: short EUR positions are cut in half and CAD longs increase.
-China will release their December economic stats on Wednesday after NYC close.
-BoC tomorrow; we do not expect additional commentary over CAD strength.

FX Market Update

• The US market is closed for Martin Luther King Day, however global markets are on a positive footing. Equities are strong, oil is back above $78/barrel and the USD is generally weaker. There have been no major developments over the weekend and focus this morning is on the EU finance minister’s meeting, earnings and the general market sentiment that it is too early to cut global stimulus, which should reward investors in risk seeking territory.
• G7 currency volatility (see middle chart) has had a noticeable decline, and a more rapid drop than equity vol as measured through the VIX. This reflects investor sentiment that is increasingly comfortable with FX valuations and hints that some currencies might be range bound for the near-term. The other implication is that low volatility is one of the important fundamentals that the carry trade relies on. Accordingly, with G7 vol now sitting below 12, the lowest levels in 16-months, there is increasing appetite from carry trade players. The lowest yielding currencies continue to be the JPY and USD. The resurrection of carry puts downward pressure on both of these.
• The CFTC speculative positioning data underwent a significant change last week. USD bulls lost their conviction and many who had held aggressive long positions began to pare back their exposure to the USD - see top chart. The most notable change came against EUR, where the net short EUR position was cut in half and now stands at $3.2bn. The other noticeable development in the data (and this has been an ongoing theme over the last several weeks) was the bullish sentiment towards commodity currencies. This is inline with our expected 2010 currency return pattern, where we have commodity currencies outperforming.
• Recently we have seen an increasing preference to play commodity currencies against each other on a relative basis. We think there is value in this approach (and prefer the AUD for near-term traders, but CAD for medium term strategies), but still think there is value in holding long AUD and CAD positions against both the USD and EUR. With global bodies supporting growth at any cost and the Fed still several months, if not quarters, away from the first interest rate hike, we expect further upside in commodity currencies.
• Returns on a year-to-date basis highlight what we think will be the pattern for Q110. Commodity currencies have outperformed, with AUD having gained 3.2%, CAD having gained 2.6% and NOK and NZD up 2.2%, while EUR and the USD have underperformed noticeably. C.S.

Americas

USDCAD (1.0275) • CAD is trading very close to Friday’s close and well within last week’s 1.0225 - 1.0414 range. Last week was an interesting one as fundamentals were mixed drivers for USDCAD. Oil dropped -5.7%, the DXY (USD index) was flat, 2-year bond spreads moved against USDCAD and sentiment remained noticeably bearish. USDCAD closed the week down just 0.01% (at 1.0291), but at the bottom end of its multi-month range. We continue to believe that investor sentiment and fundamentals will be supportive of a break below the October 1.0207 low.
• Tomorrow the Bank of Canada (BoC) meets and is universally expected to leave interest rates on hold at 0.25%. We expect the tone of the statement to have improved since their December 8th meeting, but for Governor Carney to continue to sound dovish. We do not expect any major changes to their commentary regarding CAD. On December 7th (the day leading into the last meeting), USDCAD closed at 1.0513, just 2% above current levels; in addition in the MPR the BoC used 1.04 for forecasting purposes. Accordingly, we believe USDCAD is roughly in line with the BoC’s expectations. In addition, much of the strength in CAD during 2009 was due to Type 2 factors - namely broad based USD weakness; however we would argue that recent strength is Type 1 - reflecting changes in aggregate demand for Canadian goods and services. The BoC has made it very clear that there is less of a need for monetary policy to respond to Type 1 movements. Accordingly, we do not expect the BoC to increase the strength of their commentary over CAD strength, which should prove positive for CAD bulls. C.S.

Europe

EURUSD (1.4375) • EUR is underperforming today, but is entering the North American session essentially where it closed on Friday. Today the EU finance ministers are meeting and accordingly there could be further headlines about Greece and the weaker sovereigns. All in all, with think EUR has held in well considering the negative developments from Greece. There was no major data released today, but tomorrow’s ZEW will provide an update on economic sentiment for markets. • The most important development last week was ECB President Trichet’s press conference, which was fairly balanced. He reiterated the importance of a strong USD, noted that there are significant hurdles that face the EU and that inflation pressures seem balanced. However, his tone was far from optimistic and his comments made it clear that the ECB is in no rush to increase interest rates. • Technically, EUR’s 200-day moving average (1.4288) has provided solid support. A drop below here would be bearish. Resistance lies at congestion of 1.4440. C.S.

Asia / Oceania

USDJPY (90.75) • The yen is flat as we move into the North American open. • Industrial production came in below the previous release at 2.2% m/m and -4.2% y/y; however the BoJ did raise its economic assessment in almost half of the country’s regions. Governor Shirakawa said that Japan’s economy is picking up but that the BoJ will keep ‘extremely accommodative policy’ in place. • The unfolding Japanese political funding scandal, where the DPJ’s secretary general has been arrested, has yet to cause any significant pressure on yen. C.S.
AUDUSD (0.9265) • Providing a lift to the currency and expectations for further interest rate increases by the RBA, Australian inflation increased 0.3% m/m and 2.6% y/y in December. The increase in inflation hints that as the economy continues to strengthen there might be ongoing pressures on inflation, which should keep the RBA sounding relatively hawkish. C.S.
USDCNY (6.8268) • One of the most important market drivers is the pace and strength of the global economic recovery. Accordingly, developments in China’s economy, a major part of the global growth engine, weigh on markets. Early in Thursday’s Asian session (after the Wednesday North American close) China is expected to release its December economic releases. This will include Q4 growth, expected to come in at 10.5% y/y, CPI, retail sales and industrial production. C.S.

Commodities

Oil (78.40) • Oil is beginning the week on positive footing as Qatar’s energy minister commented that OPEC most likely won’t raise output in 2010. Accordingly, the 50-day moving average (77.13) has held as support and oil is now trading back over 78.00/barrel. This is positive for CAD. Currently, the 45-day rolling correlation between oil prices and CAD stands at 0.67. C.S.
Gold (1135.72) • Gold is firmer today, and continues to trade either side of its 50-day moving average of 1134.54. C.S.

Suggested Reading

Digging out of Debt: The Rich World’s Debt Reduction has Barely Begun, The Economist (January 14, 2010) A Greek Crisis May Well Become Germany’s Problem, Bronwen Maddox, The Times (January 18, 2010) Ominous Lessons of the 1930s Europe, Paul De Grauwe, FT (January 18, 2010) European Banks Tap US Market in Refinancing Drive, Alex Chambers and Jane Merriman, Reuters (January 18, 2010) Carney Enters Crucial Phase for Recovery, Jeremy Torobin, The G&M (January 18, 2010)

Please consider voting for us in Euromoney's FX Poll 2010 between January 14 and February 26. The link can be found at http://www.euromoney.com/stub.aspx?stubid=92.
___________________________________
Camilla Sutton, CFA, CMT Sacha Tihanyi
Currency Strategist Currency Strategist
Scotia Capital Scotia Capital
416-866-5470 416-862-3154
Camilla_sutton@scotiacapital.com Sacha_tihanyi@scotiacapital.com



*************************
The Plaza Futures Group



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USD ENTERS HOLIDAY WEEKEND ON FIRMER FOOTING USDCAD closes at 14-month closing low; but has yet to break below 1.0207.
-US CPI could be important market driver today.
-Trichet’s comments on strong USD and hurdles facing EU weigh on EUR.
-China’s SAFE says it will improve transparency of FX policies.

FX Market Update

As we enter the US long weekend, the market is vulnerable to some profit taking and closing of short-term positions. This might have added to the positive tone for the USD set by Trichet’s comments, but most currencies are still trading within yesterday’s ranges. US equity futures are unable to mount a real rally even as Intel and JP Morgan have reported better than expected earnings. However, market sentiment continues to be strong as yesterday the S&P index hit a new 14-month high, the VIX is trading comfortably below 20 and at an 18-month low and the two year bond yield remains at its 100-day moving average of 0.90%. In this environment we would have expected the USD to be weaker than it is. The DXY is trading at 77.15, having been unable to break below its 100-day moving average of 76.46 over recent sessions.
• Sentiment, which swung quickly in favour of the USD in December, seems to be increasingly more balanced. There is still hesitancy to be long EUR, even though we think that this position will prove rewarding over the 3 month horizon. At a minimum short EUR positions have decreased from their highs, there is less EFT appetite to be long USD (see middle graph) and speculators are no longer building short EUR positions. In addition, pricing in the option market is far more balanced, no longer positioning for a spike higher in the USD. Accordingly, this more balanced market should allow currencies to trade off of fundamentals. We continue to believe that it is too early to be long the USD on medium term timeline.
• Indirect bids in yesterday’s 30-year auction were in line with previous auctions at 40.7%, which should provide some reassurance to those worried about how willing foreign central banks will be to fund the US deficit. • Today’s CPI will be important with any deviation from consensus having a impact on the USD. Today the US will also release empire manufacturing, industrial production, capacity utilization and University of Michigan confidence. C.S.

Americas

USDCAD (1.0265) • The USD is broadly stronger today, which has taken USDCAD off its recent low, but has still left downside momentum in place. Yesterday USDCAD reached a new 3-month intraday low and a new 18-month closing low. We think this provides evidence that momentum is still behind the down move in USDCAD. A break below the October intraday low of 1.0207 is the next test for the currency, but we expect this to be achieved in the near-term. Support comes in at the October low of 1.0207, while resistance lies at the one-month downtrend line of 1.0376. • Should oil continue to drop lower it will dampen our expectations for CAD; however this is not our base case. • There are no key releases from Canada today, but next week will see the BoC interest rate decision. It is universally held that interest rates will remain at 0.25% and accordingly the focus will be on Governor Carney’s comments. In the last MPR, the BoC used 1.04 as their estimate for USDCAD. We are still trading very close to this level. Accordingly, we think the BoC will raise CAD as a risk to growth and inflation but that it will not increase its concern over the currency. In addition, the BoC is sensitive to what drives CAD appreciation (Type 1 or 2). We think that the recent strength in CAD has been more fundamentally led, which will give the BoC less of a need to respond through monetary policy. Accordingly, we do not expect developments at next week’s BoC meeting to dampen our outlook for an appreciating CAD. C.S.

Europe

EURUSD (1.4390) • EUR is underperforming today, having lost 0.7% against the USD. • There were no major surprises from the ECB yesterday. Trichet reiterated the importance of a strong USD, noted that there are significant hurdles that face the EU and that inflation pressures seem balanced, with commodities adding upside risks and the economic environment adding downside risk. His tone was balanced, but far from optimistic. Finally, he provided no hint that tighter monetary policy is on the near-term horizon. • Today’s Eurozone CPI came in at 0.3% m/m, 0.9% y/y and 1.1% y/y on core. Accordingly, inflation pressures in Europe remain contained, but continue to creep higher. Any acceleration in inflation measures will concern the ECB and should provide a boost to the EUR. • The Eurozone trade balance came in at a disappointing 4.8b as exports fell 0.4% m/m. This drop in exports will be concerning to those who worry over the impact of EUR strength (in November the average closing level of EUR was 1.4928). • Technically, EUR is trading squarely between its 100 and 200-day moving averages (1.4679 and 1.4283), a break of either side will provide a hint as to the pressures on the currency. Short-term technicals continue to be bullish, however with the ADX, which attempts to quantify whether or not an asset is in a trending or non-trending environment, only at 19 there is increasing evidence that EUR is content within its recent 1.4218 to 1.4579 range and a catalyst will be needed to push it higher. We continue to believe that the near-term outlook for EUR is strong and hold a Q110 forecast of 1.5000. C.S.

Asia / Oceania

USDJPY (90.90) • The yen is stronger on a broadly stronger USD and news from the MoF that foreigners were aggressive buyers of equities and bonds in the first week of January. • The US - Japanese two-year bond spread continues to be the key driver of USDJPY. The spread has dropped back to 73bpts, which has put downward pressure on the currency. Technically, a break below the 100-day moving average of 90.45 would be bearish USDJPY. C.S.
USDCNY (6.8270) • China’s reserves rose to $2.4bn in December, a 23% y/y increase and a 0.4% m/m increase. Accordingly, China continued to be an important buyer of USD in December. • With no specifics, SAFE (State Administration of Foreign Exchange) has released a statement saying it will improve the transparency of its foreign-exchange policies. • Since the release of strong year-over-year exports and slightly tighter monetary policy, yuan forwards have increased the amount of CNY appreciation they are pricing in over the next year from 2.4% to 3.25%. We believe that we will soon see Chinese authorities allow a measured appreciation of the yuan. • New yuan loans increased to 379.8b in December. This is well off the high of 1,891 we saw in March 2009, but higher than November. C.S.

Commodities

Oil (78.90) • Oil has now fallen down below $79/barrel as downward pressure on commodities continues. The CFTC is proposing to impose new trading restrictions on the largest traders in oil and energy - see suggested readings. This is weighing on oil prices. C.S.

Suggested Reading

Inflation Threat to China and India, FT (January 15, 2010) In Reversal, Federal Regulators Now Propose to Limit Oil and Gas Commodities, Zachary Goldfarb, The Washington Post (January 15, 2010) Trichet Rejects Special ECB Help for Greece, Brian Blackstone, WSJ (January 15, 2010)

Camilla Sutton, CFA, CMT Sacha Tihanyi
Currency Strategist Currency Strategist
Scotia Capital Scotia Capital
416-866-5470 416-862-3154
Camilla_sutton@scotiacapital.com Sacha_tihanyi@scotiacapital.com

*************************
The Plaza Futures Group



EL MUNDO Y LAS FINANZAS.

Fonds pour les investissements et le développement.

FOND DU PLACEMENT PER DEVELOPPEMENT OVERSEAS CORPORATION.

FOPLADE- Análisis Financiero.

ECB KEEPS KEY POLICY RATE ON HOLD...WAIT FOR TRICHET Trichet likely to be peppered by questions on Greece during press conference.
-Australian employment data sends AUDUSD briefly to a two month high.
-NIESR points to expanding UK growth in Q4 at 0.3%.
-Greek PM vows to do whatever it takes to bring budget back within EU limit.
-Fed’s Dudley suggests rates on hold for at least six more months.

FX Market Update

The currency market has pulled back from yesterday’s strong risk seeking trading theme that sent all major currencies up against the USD and JPY. AUD is leading due to strong jobs data, while NZD, NOK and CAD are also seeing some support from better commodity prices over the past two days. The yen is once again weaker, while GBP and EUR are seeing downside pressure after strength in Asia. European equities are gaining following the lead set by Asia, though North American equity futures are looking mixed to down. US short yields bounced higher yesterday (though slightly down today), helping to push USDJPY higher on rate differentials. • The USD index has traded lower for the past four sessions (excluding today) and is risking a move back below its 100-day moving average (currently at 76.47) as the index trades just below 77. We continue to look for the index to resume a slow grind lower with the potential risk of a challenge to the 2008 lows around 70.70. • Though the US’s credit rating seems to be safe for now, the same cannot be said for all constituent states. Yesterday, S&P cut California’s debt rating from A to A- and maintained a negative outlook. • Yesterday we highlighted the rather hawkish remarks by Philadelphia Fed President Plosser. Since then we have heard a speech by New York Fed President Dudley (also an alternate FOMC member this year) who gave quite a differing view. Dudley said that rates are going to stay low for a considerable period of time yet, adding that it could be for at least six months and even suggested one year or two years from now (all dependent on economic developments). He also clashed with Plosser’s view that rates should rise before indicators of slack in the economy (such as unemployment) reverse course, Dudley said that he would need to see an economy vigorous enough to bring the unemployment rate down before he could support a rate increase. Thus the past two days have brought very differing views on US rate increase timing, though from alternate FOMC members which somewhat dulls the impact of the comments. • Yesterday’s Beige Book saw ten out of twelve districts showing evidence of improving economic conditions, an increase from the previous release that showed eight out of twelve improving. However the Beige Book also noted that the labour market remained soft in most districts which should keep wage and price pressures subdued. • The Chinese National Development and Reform Commission released information indicating that house prices in 70 cities across China increased 1.5% m/m and 7.8% y/y, indicating what is already obvious to Chinese policymakers, that the risks posed to the economy by the impact of real estate bubble are growing. This is a prime reason for the recent monetary tightening measures in China and we can expect to see more of these policies executed over the coming months. S.T.

Americas

USDCAD (1.0315) • Canada surged with the afternoon recovery in oil and equities yesterday, closing well below 1.04 and keeping the downtrend in USDCAD well intact as CAD outperformed all major currencies. CAD is currently trading near flat against the USD, keeping it in the upper echelon of performers. There is no economic data until tomorrow’s new motor vehicle sales, leaving CAD subject to USD trends, which on a daily basis remain favourable for the loonie. Intraday support is holding at 1.0290. Look for downtrend resistance to come in a hair below 1.04 today while the market targets the (nearly) three month low at 1.0253 ahead of the 1.0207 level. S.T.

Europe

EURUSD (1.4487) • The ECB kept rates on hold today very much as the market expected. Scotia looks for the ECB to keep rates at current levels until the second quarter, though given economic and monetary developments in the Eurozone the balance of risk is tilted to the central bank staying on hold for longer than that. We will watch President Trichet’s press conference today with a particular focus on his response to questions which are certain to be focused on the current fiscal problems in Greece. The market will look for Mr. Trichet to provide a measure of reassurance regarding the coherence of the Eurozone, however he will be constrained by an unwillingness to transmit the notion that those nations well outside of EU economic compliance limits can always depend on unconditional support. Eurozone industrial production increased by 1% in November and saw a positive revision to the previous month’s contraction (now at -0.3%m/m vs. the previous -0.6%). German producer prices increased by 0.8% m/m, the biggest monthly gain in eight months, however prices were driven by an increase in energy costs rather than strong demand factors. S.T.
GBPUSD (1.6260) • Sterling is trading down 0.1% today following yesterday’s overly enthusiastic reaction to an interview with Bank of England policymaker Andrew Sentance. Cable looks to be at trying to stage a breakout to the topside and return back to the middle of the range (capped just above 1.70) that has held since May of 2009. The topside is currently being held buy GBPUSD’s 100-day moving average at 1.6308 (see graph), though this level has been challenged today . The NIESR’s rolling quarterly GDP estimate for the month of December (see graph) showed a further positive move away from negative territory, implying a Q4 GDP increase of 0.3% (not annualized). S.T.

Asia / Oceania

USDJPY (91.79) • USDJPY is moving higher today, leaving JPY as the worst performing currency for two days in a row as the yen is currently trading down 0.5%. November Japanese machine tool orders (a volatile series) fell 11.3%, the largest monthly decline since November 2008. Still, the 12 month monthly moving average is improving (though now slowly) as it currently sits at -1.7%. S.T.
AUDUSD (0.9287) • The Australian dollar is the best performing major today, up 0.5% against the USD and holding on to its gains as other currencies are pressured heading into the North American day. The market was surprised by a 35.2K increase in December employment as expectations were set for a 10K print, a factor which drove AUDUSD briefly back up to a two month high. Australian short term bonds yields have increased on the news with the two year pushing back to 4.55%, its highest yield in a month. S.T.

Commodities

Oil (79.79) • Crude took a hit yesterday following the release of the weekly DoE oil inventory data which showed inventories building for the second consecutive week. Inventory data has come in higher than market expectations since the last week of December which has helped to restrain crude’s one month surge higher, though it still remains near the highest level in over a year. Crude rebounded in European trading to recapture an $80 handle, however oil is being pressured lower as we head into the North American day. S.T.
Suggested Reading
Chinese property prices spike, Jamil Anderlini, FT (January 14, 2010) S&P Cuts California Debt Rating, AP, WSJ (January 14, 2010) Senate Aims for Bernanke Vote Before Fed Term Ends in January, S. Lanman, J. Rowley, BB (January 14, 2010) Fed Beige Book Shows Modest Gains, Justin Lahart, WSJ (January 14, 2010) Please consider voting for us in Euromoney's FX Poll 2010 between January 14 and February 26, at http://www.euromoney.com/stub.aspx?stubid=92.


*************************
The Plaza Futures Group



EL MUNDO Y LAS FINANZAS.

Fonds pour les investissements et le développement.

FOND DU PLACEMENT PER DEVELOPPEMENT OVERSEAS CORPORATION.

FOPLADE- Análisis Financiero.

USD WEAKER, AS GBP LEADS THE MAJORS
-Fed’s Plosser says rates must increase before unemployment falls.
-Market will look for further US economic improvement in Beige Book release.
-EUR’s rally amidst suspicions over the quality of Greece’s financial reports is bullish.
-Sentance implies that the MPC might adopt a ‘wait and see’ approach.

FX Market Update

The USD has trended weaker through the Asian and European sessions. Though showing some temporary strength against the euro, the dollar index is now trading lower for the fourth session in a row. Most currencies are gaining against the USD, with GBP, NOK, SEK and EUR leading while JPY loses some ground after yesterday’s very strong gain. Surprisingly, commodities are not showing a great deal of upside buoyancy with oil off and a lack of upside momentum in natural gas and copper, while equities look mixed. The two year US government Treasury is weaker today, helping the yield hold above 0.9%, a move that is being mimicked across the government bond curve.
• Philadelphia Federal Reserve President Charles Plosser (an alternate voting member in 2010) gave a speech yesterday on the US economic outlook, and suggested that “interest rates must increase well before the unemployment rate or other measures of resource slack have diminished to acceptable levels.” These comments dovetail nicely with an article in the Wall Street Journal today (see readings: “Bernanke Challenged on Rates’ Role in Bust”) and directly suggests that, contrary to Fed Chairman Bernanke’s speech, low real rates for too long a period risks causing inflation later on in the business cycle. Given Plosser’s alternate voting status this year (less weigh than a voting member), markets are given nothing more than a hawkish view on the Fed outlook but are reminded that there is an ongoing debate inside the Fed. Given the current upwards trajectory in nonfarm data (smaller losses) look for the USD to be better supported by rates on the short end and less subject to the risk-on/risk-off trading patterns so prominent in 2009.
• Today the Fed’s Beige Book will be released providing the market with an anecdotal read on the US economy. In the December release, the Beige Book noted that economic conditions had generally improved modestly since the last report with 8 out of 12 Fed districts reporting an improvement in economic conditions while Cleveland, Richmond, Philadelphia and Atlanta reported stagnant or mixed developments. Any significant improvement would be mildly bullish for the USD in the current trading environment. S.T.

Americas

USDCAD (1.0350) • CAD is performing better than yesterday, currently up 0.5% against the USD but USDCAD is still trading above yesterday’s intraday low. CAD’s short term fundamental drivers are moving against it today as oil is testing back below the $80 level and the US-Canada 2-year interest rate spread is displaying a continuing lack of support for CAD. Though short rate differentials have been a key driver of the USD over the past 1.5 months, the spread between Canada and the US seems to have been less of a driver on a daily basis as the direction in USDCAD and US-Canada 2-year rates have moved in opposite directions (see graph). The rolling 1-month correlation between the two had fallen to near 0 by the end of November and into negative territory through mid December (currently at -0.75). The lack of rate support, the weakness in oil and a lack of further improvement in the risk skew in the options market over the past week is leading our short term USDCAD model to indicate a very slight (but as of yet within the margin of error) overvaluation in CAD. However, we still remain short term bullish the currency against the USD outside of a major meltdown in crude and general USD strength, particularly as CAD has underperformed other major commodity currencies (like AUD and NZD) that arguably have much more positivity priced into them currently. We look for a close below 1.04 in the pair to keep downside momentum well in play. S.T.

Europe

EURUSD (1.4560) • EUR has gained 0.5% against the USD as we move into the North American session. • Germany’s budget deficit came in better than expected but annual growth dropped 5%, while France’s CPI came in above expectations. Accordingly, the data today has been fairly mixed. • News from Greece continues to deteriorate. The European Commission’s report on Greece highlights concerning irregularities in the data the country submits to the EU. Essentially the quality of Greece’s numbers are widely suspect, which implies that information on their deficit and financial situation is likely worse than currently thought. • EUR’s ability to rally in the midst of this indicates that a lot of sovereign risk is already priced in. We think the outlook for EUR is volatile, but that over the next few months it will be capable of sustaining a rally. • Technicals for EUR are relatively strong as a buy signal has been generated from its MACD, the 9-day has crossed above the 21-day moving average (1.4417 and 1.4381, respectively); and the candlestick pattern displays a bottoming and is now attempting to rally. Today’s push above Friday’s high of 1.4557 highlights momentum behind EUR upside. We are biased to be long EUR on both a short and medium-term horizon and hold a Q110 quarter-end forecast of 1.50. C.S.
GBPUSD (1.6275) • Sterling is outperforming today as comments from the BoE’s Sentance in the Guardian are taken as hawkish (see Suggested Reading). We would argue that the comments are actually more neutral as he said things like “If the MPC comes to the decision that it doesn't want to add to the monetary stimulus it doesn't mean it is going to tighten. There could be 'wait and see' while the recovery gathers momentum”. We expect the BoE to remain fairly dovish this year, not entering a hiking cycle until Q410. We expect that this will leave GBP as a mid-performer, underperforming both CAD and EUR. • Today, industrial production came in slightly above expectations at 0.4% m/m and manufacturing production disappointed, coming in flat m/m. C.S.

Asia / Oceania

USDJPY (91.35) • USDJPY is trading within yesterday’s range, but has reversed some of the downside. There were no major releases from Japan today. • As the middle chart on page 1 highlights, USDJPY and the 2-year bond yield spread continue to move in sync. Over the last few sessions USDJPY has dropped lower as US short-yields have dropped and Japanese yields have held relatively stable. The current rolling 30-day correlation between USDJPY and the 2-year yield spread stands at 0.89. while the 60-day is at 0.86. The sensitivity highlights the importance of monetary policy on the currency, with any adjustment to Fed expectations having a major influence on USDJPY. Support comes in at the 100-day moving average of 90.50, while resistance comes in at yesterday’s open of 92.09. C.S.

Commodities

Oil (79.90) • Oil’s drop back below $80/barrel is disappointing for bulls, however the ability of the commodity to reach a new 14-month high of 83.95 last week keeps the medium-term outlook bullish. Yesterday’s increase in China’s reserve ratio put downward pressure on oil, but we continue to believe that the nature of the global recovery will be positive for oil in 2010. Scotia Economics holds an average 2010 oil price forecast of $90/barrel. C.S.

Suggested Reading

Inflation Lurks in Wings as Recovery Gets Going, Warns MPC Member, Larry Elliott, Guardian (January 13, 2010) China Hits Brakes on Economic Stimulus, James Areddy, WSJ (January 13, 2010) Even if Beige Book is Bullish, the Fed Isn’t, Kelly Evans, WSJ (January 13, 2010) Greece Condemned for Falsifying Data, FT (January 13, 2010) Bernanke Challenged on Rates’ Role in Bust, Hon Hilsenrath, WSJ (January 13, 2010)
Camilla Sutton, CFA, CMT Sacha Tihanyi
Currency Strategist Currency Strategist
Scotia Capital Scotia Capital
416-866-5470 416-862-3154
Camilla_sutton@scotiacapital.com Sacha_tihanyi@scotiacapital.com


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The Plaza Futures Group



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FOPLADE- REPORTAJE El detonante de un genocidio
Una comisión independiente concluye que los radicales hutus asesinaron al presidente ruandés para forzar la guerra

LALI CAMBRA - Ciudad del Cabo - 12/01/2010


Fueron los extremistas hutus quienes, el 6 de abril de 1994, asesinaron al entonces presidente ruandés, Juvenal Habyarimana, de su misma etnia, al derribar el avión en el que viajaba. Ésta es la conclusión de la investigación llevada a cabo por una comisión de expertos independiente sobre el suceso que detonó el dramático genocidio ruandés, en el que perecieron unos 800.000 tutsis y hutus moderados en apenas 100 días. Los radicales hutus querían abortar el proceso de paz con la guerrilla tutsi que Habyarimana estaba negociando bajo presión de la comunidad internacional.

Los hutus culparon del magnicidio a los tutsis y justificaron así la matanza

El ataque al avión en el que viajaba el presidente fue planeado durante meses por sus propios hombres, militares hutus descontentos con ese proceso, que suponía la constitución de un Gobierno de unidad nacional y la incorporación del tutsi Frente Patriótico de Ruanda (RPF) al Ejército.

El informe del comité independiente de expertos -presidido por un juez de la Corte Suprema de Ruanda y en el que se integran especialistas en defensa de la Universidad de Cranfield de Reino Unido- concluye que el atentado, en el que también falleció el presidente de Burundi, Cyprian Ntaryamira, fue presentado como obra del RPF y sirvió de excusa para iniciar el genocidio. Entre los responsables, el informe señala al coronel Theoneste Bagosora, condenado a cadena perpetua en 2008 por el Tribunal Penal Internacional de Ruanda (TPIR).

Quince años después de los hechos, los investigadores se han basado en las escasas pruebas físicas ofrecidas por el aparato y en declaraciones de 600 testigos, miembros de la guardia presidencial y del contingente de paz de Naciones Unidas, así como en los testimonios de los imputados por genocidio, detenidos en Tanzania por el TPIR. De forma inequívoca concluyen que el aparato fue derribado por dos misiles lanzados "desde el campo militar Kanombe en la capital, Kigali, bajo control del Ejército ruandés".

El informe no se limita a los aspectos técnicos del atentado, sino que describe la radicalización de hutus extremistas (en torno a la ideología xenófoba de Hutu Power) y el progresivo aislamiento del presidente Habyarimana, visto por éstos como un traidor, pese a que firmó el acuerdo de paz a desgana, presionado por la comunidad internacional.

Así, se recoge que el plan de asesinar al presidente fue ideado con mucha antelación y alude, a modo de ejemplo, que el 3 de abril, tres días antes del suceso, la Radiotelevisión Libre de las Mil Colinas, órgano propagandista de Hutu Power, "anunció un ataque fatal en Kigali entre el 3 y el 8 de abril".

Hasta el personal del avión conocía la posibilidad de un atentado y no escondía su miedo a volar con el dirigente hutu. No fueron pocos los líderes políticos que advirtieron a Habyarimana de que se iba a atentar contra su persona e incluso el presidente de Zaire (ahora República Democrática de Congo), Mobutu Sese Seko, le recomendó no acudir a Dar es Salaam. Fue precisamente de regreso de la reunión en la capital tanzana, donde se firmó la integración de los rebeldes tutsis en las Fuerzas Armadas de Ruanda con efecto inmediato, cuando se produjo el atentado.

El informe sirve al Gobierno de Ruanda, presidido por el que fuera líder del Frente Patriótico (RPF), Paul Kagame, para desacreditar las conclusiones de la investigación de la justicia francesa sobre el suceso. En 2006, el juez Jean-Louis Bruguière señaló a Kagame como el principal instigador del ataque, algo que el presidente siempre ha negado.

La acusación del juez acabó por romper las ya tensas relaciones entre la Ruanda posgenocidio y Francia, a la que el país africano acusa de haber armado a los hutus y de haber propiciado el genocidio con colaboración militar, entrenamiento y material. El informe ahonda en la cuestión al incidir en la tarea obstaculizadora francesa en la investigación inmediata del atentado.



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FOPLADE- Análisis Financiero.

USD FIRMER ON NEWS FROM CHINA
-China increased its reserve requirement ratio and sold bills at higher yields today.
-Knee-jerk reaction to PBoC is weaker commodity currencies, but med-term positive.
-Options show market sentiment towards EUR improving despite negative media.
-UK’s Europe Minister suggests that the British election will be set for May 6th.

FX Market Update

The USD has gained back some lost ground as commodities and equities are weak as we enter the North American session.
• The USD was given a lift by developments in China. For the second time in as many weeks, China sold bills at higher yields today and for the first time since June 2008 the PBoC increased the bank’s reserve requirement ratio by 0.5%, increasing speculation that higher rates are imminent. The knee-jerk reaction will be negative for commodity currencies as traders worry about a central bank imposed slowing of the Chinese economy weighing on the global recovery. However, in the medium-term we think it will help to avoid an escalation of a Chinese bubble and could help to smooth the recovery; which in turn would be a medium-term positive for commodity currencies.
• Earnings, with Alcoa kicking off the season yesterday with a disappointing release, will be an important market driver this week. Intel is set to release on Thursday and JPMorgan on Friday.
• The DXY has dropped 2% since reaching its recent 78.45 high on December 22nd. It is now trading between its 100 and 200-day moving averages (76.50 and 78.81, respectively). In the current environment monetary policy is a key driver of currency markets; accordingly, the recent drop in the 2-year yield (see chart) has been an important catalyst for USD weakness. Markets are now fully pricing in the first Fed interest rate hike by the fall, which we think is reasonable. Any change to these expectations will cause further volatility in the USD.
• The US curve continues to be at the steepest level in over 30-years (see middle chart); as the 2-year is yielding 0.91 and the 10-year is yielding 3.76 today. The initial steepening of the yield curve was driven by a jump in the long end, which reflected opposing factors: an economic recovery becoming more entrenched as well as the increasing yield demands imposed by those willing to buy US paper. The impact for the USD is mixed and depends on which factor is really driving the steepness. If it is more weighted towards the economic recovery then it is a USD positive as the combination of a firming fundamental base combined with Fed interest rate hikes are bullish. However if the steepness is more weighted towards investors demanding higher yields, it is a USD negative as it highlights the importance of the US fiscal position to investors. The more recent move higher in the curve has been driven by the short-end, with the 2-year dropping from its December high of 1.21 down to 0.91 today. This reflects the changing outlook for the Fed and policy tightening. We think monetary policy expectations will continue to dominate currency trading this year and we hold a generally bearish USD outlook.
• Today it is expected that the US releases a worsening trade balance (see top chart), with consensus calling for -$34.6b deficit. There are no Fed speakers until after the close when Fisher and Plosser will each speak. C.S.

Americas

USDCAD (1.0351) • On a year-to-date basis commodity currencies are outperforming, with a similar pattern to 2009 - AUD leading the pack, followed by NOK, then NZD and finally CAD. The fundamentals in Canada are strong, even though last Friday’s job report was disappointing. Yesterday’s BoC survey were fairly optimistic and highlighted an improving credit environment. News from China today will weigh on CAD; however we continue to believe that the long-term fundamentals are strong and that USDCAD will sustainably reach parity this year. • Technically, for the bearish USDCAD outlook to remain in place, it will need to break back below 1.0253 and test the 1.0207 October low. Resistance lies at the 9-day moving average of 1.0393. C.S.

Europe

EURUSD (1.4479) • EURUSD is trading weaker as the euro has struggled to hold in positive territory after brief attempts higher today. Regardless, we are seeing sentiment recover for EUR as speculative positioning has shown that longs have begun to reenter the market despite the fact that gross shorts continue to increase. Risk-reversals in the options market have also shown a very sharp recovery in EURUSD sentiment as the cost of EURUSD puts over and above that of EURUSD calls has declined significantly as 2010 has gotten under way (see chart). An easing in the cost of downside EUR protection against the USD speaks to the shifting in shorter term risk perceptions for the currency. We saw a close above 1.45 in EURUSD yesterday, a bullish sign, though the pair has struggled with holding above that level today. Technical indicators still look favourable for EURUSD, though it seems that the next couple of sessions are “make or break” if EUR is to recover upside momentum and trade sustainably away from last week’s range. S.T.
GBPUSD (1.6149) • Sterling is one of the better performing majors, up 0.2% against the greenback. The British trade balance improved in November as the deficit shrunk on the highest level of exports in over a year. This certainly reflects the lower relative cost of British goods as sterling has lagged most other non-USD majors since the first quarter of 2009, but also factors related to the recovery in global trade. Additionally, the UK’s Europe Minister Chris Bryant has suggested that the British government will hold the election on May 6th, though this has yet to be officially confirmed. S.T.

Asia / Oceania

USDJPY (91.59) • The yen is the strongest major, up 0.5% against the USD. However, Moody’s has raised focus on what they view as the risk surrounding the Finance Ministry’s change in leadership, saying that it does not engender confidence that the country will be able to muster a credible fiscal strategy needed to stabilize “the massive government debt overhang in the medium term.” USDJPY has moved lower over the past three sessions after failing to hold on to ground above its 200-day moving average, keeping the long term downtrend off of the 2007 high (at 94.20 today) safe for now. The Japanese December Eco Watchers Survey showed future sentiment amongst service sector workers in the country rebounding somewhat after plunging in the previous month, though still remaining below June highs. S.T.
USDCNY (6.8271) • China has executed a T-Bill sale at a higher yield for the second consecutive week, and increased the reserve requirement ratio for banks by 50 basis points, suggesting that the country has now embarked on efforts to tighten monetary policy. These actions are stoking suspicion that China may resume yuan appreciation. The 12-month USDCNY NDF has dropped more than 0.6% over the course of January and is now pricing in an implied 3% appreciation in the CNY versus the USD over the next year. S.T.
AUDUSD (0.9234) • AUD is under pressure today as the market’s knee jerk reaction to the news of the increase in the reserve requirement ratio for Chinese banks has been to sell AUD as it would imply a tightening of monetary conditions by Chinese authorities in an effort to cool domestic demand in Australia’s key export market. This combined with a generally weak profile on economically sensitive commodities like copper and oil today is pressuring currencies like AUD, NZD and NOK. AUDUSD support comes in just above the 0.9200 level, and trend support for AUDUSD off of the December 23rd low holds around 0.9110. S.T.

Suggested Reading

Recovery Imbalance: A Widening Trade Gap, Kelly Evans, WSJ (January 12, 2010) Global Imbalances and the Crisis, David Backus & Thomas Cooley, WSJ (January 12, 2010) Rate Rise Fears Spark Rush to Issue Bonds, Jennifer Huges & Aline Van Duyn, FT (January 12, 2010) Weak States Threaten Euro Stability, says Rehn, Joshua Chaffin, FT (January 12, 2010)




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The Plaza Futures Group



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FOPLADE- Clotilde Reiss devant la justice samedi
lefigaro.fr avec AFP
11/01/2010 |

Clotilde Reiss sera entendue par la justice ce samedi, a indiqué son avocat cité par l'agence Fars. "J'espère qu'elle sera exonérée de ses charges", a-t-il déclaré.

Lectrice de français à l'université d'Ispahan, la jeune Française avait été arrêtée le 1er juillet pour avoir participé à des manifestations de protestation contre la réélection controversée du président Mahmoud Ahmadinejad le 12 juin.

Elle est accusée d'avoir participé à des rassemblements et à des troubles les 15 et 17 juin, et d'avoir rassemblé des informations et des photos qu'elle aurait remises à l'attaché scientifique de l'ambassade de France.

Elle avait été libérée sous caution le 16 août, sous condition de rester à l'ambassade de France à Téhéran, dans l'attente de son jugement.
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EL MUNDO Y LAS FINANZAS.

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FOPLADE- Análisis Financiero.

MARKET PUSHES THE USD TO A THREE WEEK LOW USD weaker following Friday’s nonfarm, reflecting less bullish FED rate outlook.
-CAD underperforming, but USDCAD is still approaching its 2009 low of 1.0207.
-Chinese exports jump 17.7% y/y; bringing CNY appreciation one step closer.
-Venezuela devalues by 50%, to 4.3 and implements subsidized 2.6 peg for imports.

FX Market Update

The USD is on a back-step today as equities are moving northward in Asia and Europe, while US equity futures look positive and the 2yr Treasury has remained at Friday’s rather repressed levels which followed the release of the disappointing December nonfarm payroll data. The mood of the market to begin this week seems to be generally positive following the release of Chinese December trade data which showed annual export growth expanding rapidly for the first time in over a year. To the degree to which China’s exports can be used as a proxy for the health of global trade, this is indeed reason for celebration.
• It is not a straight forward story of commodity currencies doing well despite the fact that commodities are all stronger today from industrial to precious metals and oil. NOK and AUD are solidly gaining, however GBP is also leading and EUR is not all that far behind. NZD and CAD are still up though underperforming, particularly the latter, and the yen is also lagging.
• Friday’s disappointing nonfarm data pushed the USD lower, setting up the conditions for today’s weakness as the greenback was sold through Asian trading before finding support in Europe. Nevertheless, the USD index has broken to its lowest point since mid-December and risks recapturing stiff downside momentum. The USD’s fortunes today reflect nonfarm data impact on the preeminent short term USD support factor, the expectation of Fed rate moves in 2010. The August Fed Funds futures contract is now priced at its lowest yield (0.375%) since December 1st (see graph), a dynamic also reflected (though to a lesser degree) in longer dated 2010 contracts.
• Though the Friday data came after the time period covered by CFTC positioning data (which covers up to Tuesday) we can see that the strongest speculative USD buying impulse seems to be dying down (see graph). The most recent CFTC data shows that the value of the USD net long position was cut on bullish shifts in the commodity currencies versus the USD. This information combined with spot price action since Tuesday points to a lack of conviction on bullish USD sentiment past the impressive December moves. Additionally, rate support for the USD is ebbing, compounded by a generally dovish recent speech by Fed Chairman Bernanke (regulation, not low rates was to blame for the housing bubble) which sets up a weak interim USD outlook, in line with our forecast.
• In the US the Fed’s Beige book, retail sales, CPI and industrial production will provide a busy data week, with much food for thought for US monetary policy coming from Beige Book and CPI. S.T.

Americas

USDCAD (1.0270) • CAD is underperforming despite being up 0.3% against the USD. While financial market variables and short term FX trends suggest that CAD should be positioned more at the upper end of the performance charts, Friday’s employment disappointment (eventually offset by the impact of nonfarm) and the proximity to the 2009 low in USDCAD are proving to be key constraints to CAD strength today. Technically the weight still remains firmly placed on USDCAD as we continue to look for increasingly aggressive challenges at the 1.0207 2009 low. • With the market once again trading CAD aggressively, we have to wonder what policymakers think about current trading levels. Deputy Governor Timothy Lane will provide a speech today, focused on Canada’s housing market through the recession and the recovery, though the market may care more about potential currency comments. Today’s Q4 Senior Loan Officer Survey and Business outlook data will also be important as the Q3 release showed great optimism on future sales and a lower pace of tightening in credit conditions. S.T.

Europe

EURUSD (1.4540) • On a broadly weaker USD, EUR has climbed back up over 1.45 for the first time since December 17th. This comes even as Moody’s warns that unless Portugal takes “meaningful and credible steps to get the deficit under control” it will face a downgrade. We think that EUR’s ability to rally even as Portugal is in the headlines highlights that sentiment towards EUR has stabilized, and that sovereign risks are now well priced into the currency. • EUR technicals have turned bullish, with most studies now providing buy signals (MACD, DMI, moving averages) and the candlestick pattern looking increasingly firm. We hold a Q210 target of 1.55 for EUR. • The ECB will announce their interest rate decision on Thursday January 14th. C.S.
GBPUSD (1.6180) • Sterling has broken back up above its 200-day moving average (1.6119). Resistance comes in at the January 4th high of 1.6241, followed by the 100-day moving average at 1.6310. C.S.
EURCHF (1.4770) • The three-week drop in EURCHF slowed today as the new SNB President, Hilderbrand, commented that they are monitoring “foreign exchange market developments closely”. C.S.

Asia / Oceania

USDJPY (92.35) • Japanese markets were closed today (as the country celebrated the national coming of age holiday). USDJPY has dropped from its recent high of 93.77 and the 200-day moving average has held well as support (93.42). The reaction to US jobs combined with China’s strong export growth have investors adding risk to their portfolios today and is weighing broadly on the USD. Excluding the USD, JPY is the worst performing currency. C.S.
AUDUSD (0.9310) • On strong fundamentals (ANZ Job Ads increased 6%), a broadly weaker USD and strong export numbers from China, AUD has gained 0.8% against the USD. The near and medium-term prospects for AUDUSD are strong and we would expect the currency to break above the 2009 high of 0.9406 in the near-term. C.S.
USDCNY (6.8263) • The year-over-year growth in Chinese trade far surpassed expectations, with exports jumping to a 17.7% gain y/y and imports jumping 55.9% (expectations had been for gains of 5.0% and 32.5%, respectively). As the bottom chart on page 1 highlights, the volume of exports is approaching levels last seen moving into the financial crisis, which points to a global recovery that is well under way. We have maintained for some time that the larger the improvement in exports the sooner Chinese authorities will be comfortable with allowing some appreciation of the CNY. We are clearly moving towards this. In addition, strong exports should give those investors adding risk to their portfolios some comfort and it is bullish for CAD and the other commodity currencies. C.S.


Commodities

Oil (83.90) • Oil has reached a new 14-month high of 83.95 today. The rally in the commodity is supportive of a strong CAD. The 30-day rolling correlation between CAD and oil has climbed back up to 0.84. C.S.

Suggested Reading

Portugal Warned of Threat to Rating, Peter Wise, FT (January 11, 2009) The Fed and the Crisis: A Reply to Ben Bernanke, John Taylor, WSJ (January 11, 2009) Devaluation Sparks Chaos in Caracas, John Lyons & Darcy Crowe, WSJ (January 11, 2009) In China, Fear of a Real Estate Bubble, Steven Mufson, FT (January 11, 2010)
Camilla Sutton, CFA, CMT Sacha Tihanyi
Currency Strategist Currency Strategist
Scotia Capital Scotia Capital
416-866-5470 416-862-3154
Camilla_sutton@scotiacapital.com Sacha_tihanyi@scotiacapital.com


*************************
The Plaza Futures Group



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FOPLADE- REPORTAJE: La amenaza terrorista

Gaza pasa factura a Occidente
La guerra de hace un año alimentó la radicalización del agente doble jordano que atentó contra la CIA - Las secuelas del conflicto han aislado a Israel

JUAN MIGUEL MUÑOZ - Jerusalén - 09/01/2010


Sólo un lustro atrás, la noticia de que una universidad, un sindicato o una empresa occidental promovían boicotear a Israel era un fenómeno esporádico que suscitaba poco más que incomodidad en los líderes hebreos, aunque no falten sionistas de pro convencidos de que un boicoteo como el que desmoronó el Apartheid surafricano es la única vía para que Israel frene y dé marcha atrás a la ocupación de los territorios palestinos. Desde hace un año, nada más concluir la agresión contra Gaza que causó 1.400 muertes, la bola de nieve crece: las iniciativas de boicoteo florecen como hongos y los dirigentes de Israel comienzan a padecer incidentes del tipo de los que sufren los líderes más denostados. Con un agravante: las sorpresas desagradables brotan en naciones aliadas. Que se lo digan al ex primer ministro y principal responsable de la masacre de Gaza, Ehud Olmert, quien tuvo que escuchar en otoño gritos de "criminal" en su periplo por varias aulas magnas de universidades estadounidenses.


La onda expansiva del eterno conflicto árabe-israelí es hoy más que patente

Turquía paralizó el pacto de cooperación militar con el Estado sionista

La onda expansiva en el campo militar, económico y diplomático del eterno conflicto árabe-israelí es patente, y alcanza rincones insospechados. La devastación causada en la franja fue uno de los detonantes que impulsó al jordano Humam Jalil Abu Mulal al Balaui a perpetrar el 30 de diciembre el ataque contra la base de Afganistán en la que perecieron siete agentes de la CIA. Así lo explicó el miércoles su hermano a un diario árabe. Esa onda expansiva de la guerra de Gaza provoca reacciones menos dañinas en otros lares, pero constituyen uno de los principales quebraderos de cabeza del Gobierno de Benjamín Netanyahu en los últimos meses. El Ejecutivo insiste en que se trata de una campaña orquestada por organizaciones propalestinas para deslegitimar al Estado sionista.

Centros académicos de Noruega y Norteamérica han propuesto romper vínculos con universidades israelíes; Oslo retiró inversiones de empresas israelíes vinculadas a la ocupación. Sindicatos franceses y británicos se han sumado al boicoteo de productos producidos en las colonias judías de Cisjordania; la Universidad de Ariel, también en territorio ocupado, fue excluida de un concurso sobre energía solar convocado en España; Turquía, único país musulmán que ha suscrito un acuerdo de cooperación militar con el Estado sionista, decidió suspender la participación del Ejército israelí en unas maniobras conjuntas; Londres acaba de recomendar a los comerciantes que etiqueten los productos para saber si proceden de asentamientos judíos. Y la tenista Sahar Peer ya está acostumbrada a los abucheos que acompañan sus salidas a la cancha.

Los ejemplos abundan. La tensión más estridente enfrenta ahora a Israel con Reino Unido. A mediados de diciembre, Tzipi Livni, jefa de la oposición, suspendió una visita a Londres por temor a ser detenida. Lo mismo decidieron días atrás cuatro mandos castrenses. Gaza fue la espoleta de esta espiral de iniciativas que desacreditan al país. Desactivarla es una tarea ímproba. Y aún queda por resolver en el Consejo de Derechos Humanos de Naciones Unidas el espinoso asunto del informe Goldstone, el juez surafricano que acusó a Israel de cometer crímenes de guerra. Pese a que el Gobierno de Olmert vetó a los periodistas informar desde Gaza, resulta imposible ocultar la destrucción masiva que provocó la campaña militar.

Son decenas los abogados que recaban información en España, Bélgica, Reino Unido, Suráfrica, Holanda y Noruega para presentar querellas por crímenes de guerra contra los responsables de la guerra en países cuyas legislaciones contemplan la jurisdicción universal. Alguna información sobre los militares implicados se recaba en Facebook. "La Intifada electrónica nos ha pillado con los pantalones bajados", escribía recientemente el analista Doron Rosenblum. Y añadía: "Durante los mandatos de aquellos hombres brutales [en referencia a Simón Peres, Ehud Barak, Ariel Sharon y Olmert], que hablan inglés con acento marcadísimo, Israel era recibido en todo el mundo con los brazos abiertos. Hoy, pese a la relativa calma, al acento americano de Netanyahu y a su talento retórico, Israel ha sido situada en el ostracismo y sufre ataques en cada foro internacional".

El resentimiento de Tel Aviv hacia varias capitales es palpable. ¿Es Suecia un país responsable y razonable? No, a juicio del Gobierno de Netanyahu, que reaccionó airado ante la propuesta de la presidencia sueca de la UE para reconocer Jerusalén Oriental como capital del eventual Estado palestino. Las palabras de la nueva responsable de la diplomacia europea, Catherine Ashton, también levantan ronchas. "Jerusalén Este es territorio ocupado como el resto de Cisjordania", declaró el 30 de diciembre. Tampoco con Washington son días de vino y rosas. Algún ministro de Netanyahu ha tildado de "terrible" a la Administración de Barack Obama. Y de los organismos internacionales echan pestes.

"Un país que cree en la moralidad de sus acciones no debería comportarse como un sospechoso permanente y boicotear las instituciones que aplican la ley internacional... Unirse al Tribunal Internacional de Justicia colocará a Israel en el lado de las naciones progresistas...", editorializaba el miércoles el diario Haaretz. Porque Israel nunca ratificó el tratado de la corte internacional, ni el Tratado de No Proliferación nuclear. Naciones Unidas tampoco goza de su favor. Ya Ben Gurión se mofaba del organismo. "UN Shum" lo llamaba (Naciones Unidas no es nada).

Israel se engancha a la bandera del antisemitismo para rebatir el aluvión de recriminaciones, y ha decidido los nuevos campos de batalla. Además de que el Gobierno promoverá una campaña para que los turistas israelíes ayuden a mejorar la imagen del país, el viceministro de Exteriores, Danny Ayalon, asegura: "Nuestros enemigos intentaron vencernos militarmente, económicamente a través de un boicoteo, utilizando el terrorismo, y ahora emplean estructuras internacionales para derrotarnos. Las trincheras están hoy en el Consejo de Derechos Humanos en Ginebra, en el Tribunal Internacional de La Haya, y en el Consejo de Seguridad de Naciones Unidas en Nueva York".


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WEAKER CANADIAN RELEASE, BUT NONFARM IS KEY A weaker than expected Canadian employment release pushes USDCAD higher.
-Nonfarm payrolls will be key input for interest rate expectations and therefore USD.
-Eurozone unemployment rate hits 10%.
-USDJPY threatens long term downtrend resistance.

FX Market Update

Markets are fairly muted as the release of nonfarm payrolls looms. Currencies are generally flat, with GBP outperforming and AUD underperforming. Equities are in positive territory, commodities are mixed and bond yields are generally higher. • Today’s nonfarm payrolls report could prove an important driver for currency markets. Consensus, at 0k, is calling for the first non-negative number since January 2008. With the Fed’s dual mandate combined with the historical pattern that interest rates do not rise until the unemployment rate has not only peaked but is dropping lower, today’s release is of particular importance for those trying to judge the timing of the Fed’s first interest rate hike. A below consensus reading would be USD negative, as it would push out expectations for tighter policy and vice versa. Scotia Economics is calling for an above consensus gain of 50k; such a print would be temporarily bullish for the USD against EUR, GBP, etc., but not necessarily against CAD. See CAD section. • Yesterday, the Fed’s Hoenig (a voting member) sounded fairly hawkish when he commented that rates should rise over time to 3.5% - 4.5% and that the process of returning rates to more balanced levels should begin sooner rather than later. • Yesterday US regulators released a statement encouraging institutions to mitigate their exposure to potential interest rate increases. We think this reflects the reality that interest rates will begin moving higher, but that it does not imply that the timing of tighter policy is imminent. Probably more important for the US and USD is news that the NY Fed, under Geithner’s Presidency, advised AIG not to disclose important payouts to Wall Street. C.S.

Americas

USDCAD (1.0371) • USDCAD dropped significantly lower leading into the weaker than expected Canadian employment release, only to move back to yesterday’s North American close after the release. The unemployment rate remained at 8.5% and the net change in employment dropped by 2.6k (consensus was for a gain of 20k). Though the release is disappointing, employment in Canada has actually held up quite well. • Generally, USDCAD reacts more to US nonfarm payrolls than to the Canadian release, which will leave the USDCAD reaction muted until after 8:30am EST. Considering Canada’s close ties with the US, an above consensus reading on nonfarm could well be good for CAD as a stronger US is good for Canadian fundamentals. • USDCAD is rapidly approaching a test of its 2009 low of 1.0207. Supportive factors for a push lower in USDCAD have been: 1) oil jumping over $80/barrel; 2) relative fundamentals, including the limited sovereign risk associated with Canada; 3) technicals and 4) investors, who needing to be long something have en mass gone into CAD. However, balancing some of these factors is the increase in the US-Canada 2-year bond spread, which has now climbed to -32bpts and is well out of sync with USDCAD. • Technicals have turned increasingly USDCAD bearish. Short and long-term moving averages are all in bearish territory, including the 9-day crossing below the 21-day moving average (1.0430 and 1.0513, respectively). The MACD generated a sell signal on December 23rd (when USDCAD opened at 1.0574). Finally, the bearish break below the November 1.0406 low also implies that momentum is against USDCAD. With an RSI of just 38, it is not into oversold levels. Today’s knee-jerk reaction to nonfarm payrolls, could temporarily change the trend, but we continue to believe that USDCAD is well on its way to parity. C.S.

Europe

EURUSD (1.4286) • EURUSD has been pushed lower on the day heading into the North American session, but has been fairly range bound in Asian and European trading ahead of the US nonfarm payrolls data. The pair is trading near the bottom end of its range and edging closer to support at the 200-day moving average (at 1.4252 today). There was some positive economic data coming out of Germany today, as a better than expected export result (and weaker imports) helped the German trade balance move to its highest surplus level since June of 2008. Spanish Premier Zapatero, who now holds the rotating EU Presidency, proposed that the EU increase its policing of members who fail to meet their obligations under a new 10-year plan that is intended to boost EU competitiveness (see readings). Any success on such attempts could help to boost the perceptions of EU and Eurozone cohesiveness, something that has suffered through the recession and is factor that weighs on EUR. Finally, and on a not so positive note, newly released employment data has shown that the Eurozone’s unemployment rate hit 10%, the highest level since the euro’s inception. S.T.
GBPUSD (1.5999) • Sterling is an outperformer today, trading up 0.4% against the USD and leading the majors. This still leaves GBPUSD trading on either side of the 1.60 level with a 1.5 month downtrend in place. Producer prices in the UK rose by 0.7% in December, the highest spike in over a year and a half, helping the y/y rate of change in core producer prices (currently at 2.6%) to push above the five year average rate of inflation. S.T.

Asia / Oceania

USDJPY (93.29) • USDJPY has seen its intraday weakening trend cut after briefly pushing through its 200-day moving average from below for the first time since July. This places USDJPY back within striking distance of the massive 2.5 year downtrend from the high of 124.13 from June of 2007 (see chart) which comes in today near 94.25. The new Japanese Finance Minister Naoto Kan continued to lay out the government’s current approach to the yen, which seems to be a synthesis of his predecessor’s view that currency values should be determined by markets, and the practical concern that too strong a yen in the near term will place unwanted deflationary pressures on the country’s economy. Kan has said that he reserves the right to act on currency strength in “emergency situations”; the market seems to be taking his stance into strong consideration as JPY remains on its sharp depreciatory trend against the USD. S.T.

Commodities

Oil ($82.50) • Crude is down slightly on the day and has faced more downside pressure than upside support intraday as oil stabilizes near the highest level since October of 2008. Crude is on track to record its fourth weekly gain, as its bullish trend remains intact. One needs to look back to the first quarter of last year to find a weekly string of gains longer than four. S.T.
Gold ($1122) • Gold is weaker today as the USD shows stability ahead of today’s nonfarm payrolls data. Late week softness in the metal has cut into the strong gains that followed with Monday’s 2.2% price surge. A very solid nonfarm payroll number risks producing sharp USD strength, a factor which could further cut into gold’s weekly gains. S.T.
Suggested Reading
Spain aims to bring EU states into line, Tony Barber, FT (January 7, 2010) Japan goes into damage control on yen, Michiyo Nakamoto, FT (January 8, 2010).
Federal Reserve warned on interest rates, Krishna Guha, FT (January 8, 2010) Big Deficits Cloud Britain’s Future, Alistair MacDonald, WSJ (January 8, 2010) New York Fed Told AIG to Shield Payouts, Serena Ng & Michael Crittenden, WSJ (January 8, 2010)




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The Plaza Futures Group



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CHINA SIGNALS POLICY TIGHTENING

-PBoC unexpectedly sells 3-month bills at a higher yield implying monetary tightening.
-New Japanese Finance Minister calls for a weaker yen.
-FOMC shows consideration for more asset purchases if conditions warrant it.
-NOK weaker on comment from Norwegian Industry Minister.
-BoE leaves policy unchanged at today’s meeting.

FX Market Update

The USD is getting a bid today in what looks to be a bout of risk aversion as Asian equities moved weaker, led by China, which has had a deleterious impact on North American equity futures (currently pointing to a negative open). The Treasury market has stabilized after a sharp drop in short yields yesterday, mirroring the USD’s fall following the release of the FOMC minutes. CAD, AUD and EUR are outperforming today, though still under pressure against the USD, while NZD, JPY and NOK are seeing the largest losses with the latter two trading weaker on negative currency comments from policymakers.
• The People’s Bank of China has sold 3-month bills at a higher yield for the first time in almost 5 months. Without overstating the immediate impact of a sale of bills at a yield only four basis points higher than the previous sale (bills are now yielding 1.3684%), this move is a deliberate one and suggests that Chinese policymakers are beginning to make good on promises to use policy to ensure that domestic monetary conditions do not lead to overly problematic asset bubbles, while still providing an overall stimulatory environment. Interestingly, if Chinese authorities choose to tighten monetary conditions using domestic rate policy (along with regulation) it perhaps does not bode well for those hoping to see tightening executed through exchange rate policy, though with the export side of the economy not the direct culprit for areas of worry in the Chinese domestic economy (real estate being one key example), this only makes sense.
• Yesterday’s FOMC meeting minutes provided some surprise for currency markets as it appears that some policymakers considered that it “might become desirable at some point in the future to provide more policy stimulus” via an expansion in large-scale asset purchases beyond the first quarter, particularly if the outlook for growth weakens or strains appear in the mortgage market. For those in the market who believed that the Fed was done with stimulatory measures, which is to say most considering the recent behaviour of short yields and the USD, this came as a surprise. Predictably, the USD weakened off sharply against the majors before recovering some ground ahead of yesterday’s close. Short yields fell precipitously on the news, but have now stabilized, however we are once again made aware of the sensitivity of the USD to the behaviour of the short end of the yield curve, particularly as it relates to the market’s take on the future of Fed policy. A perception that the Fed is angling towards looser policy for longer (relative to current market expectations) suggests a risk that the USD becomes subject to accelerated short term pressure. On that front, the August Fed funds futures contract has dropped from an implied yield of 0.57% from its Thursday close to the current 0.43%. The other relevant USD comment from the FOMC was that any tendency for USD depreciation to put significant upwards pressure on inflation would bear close watching. This is key as the FOMC is concerned with the potential for inflation expectations to become unanchored in the face of extremely stimulatory policy. S.T.

Americas

USDCAD (1.0321) • CAD remains an outperformer, trading near flat against the USD but leading
all other majors. USDCAD continues to register lower intraday highs and lows (for five consecutive sessions including today), keeping the CAD appreciatory trend well intact and USDCAD at a 2.5 month low, a trend we are well in favour of as we look for a near term test of the 1.0207 October low. Today’s Ivey PMI is expected to drop somewhat to 52.0, though the 12 month moving average in the indicator continues to show a upwards propensity along with the actual PMI series (see chart). S.T.

Europe

EURUSD (1.4336) • EUR is under pressure against the USD (down 0.5%) but is performing quite well against the major currencies. Data however is weighing on the Eurozone as retail sales fell by 1.2% in November against expectations of a flat result. Retail sales fell 1.1% in Germany as the market looked for a 0.3% gain (combined with a sharp downwards revision to the October data), though an increase in German factory orders helped to provide a very minor short term EUR boost, despite the fact that the 0.2% gain still came in very much lower than expectation. EURUSD has displayed only a minute propensity to trend upwards since the multi-month Dec. 22nd low, though we remain biased for support to hold at the 200-day moving average and a slow grind higher in the pair. S.T.
GBPUSD (1.5918) • Sterling was down 0.6% before the BoE monetary policy announcement. The BoE kept rates and asset purchase amounts unchanged, in line with market expectation, with very little reaction from GBP on the news. The key information will be the tone of the discussion at the meeting and whether the Bank is leaning more hawkish or dovish relative to the last policy meeting. This bias (should there be one) will be revealed on January 20th with the release of the minutes .
EURNOK (8.2010) • NOK is the weakest performing major today, down 0.5% against EUR and 0.9% against the USD. This follows EURNOK closing yesterday below the 8.20 level for the first time since September of 2008. This has led Norway’s Industry Minister Giske to comment that the strong economy and gradually increasing interest rates have left the country “in a position where the risk of a too strong currency is evident.” Giske made the implication that this is a factor that must be taken into consideration when developing fiscal policies, echoing comments made in early November that budget spending must be contained in order to avoid pressuring interest rates higher. S.T.

Asia / Oceania

USDJPY (93.12) • USDJPY has gained 0.9% moving into the North American open, trading back up to the 93 level helped by USD strength and comments by the new Japanese Finance Minister Naoto Kan. It appears that the Japanese government is once again focused on preventing too strong a level in JPY, as Kan said that he will seek to keep the yen at “an appropriate level while considering various impacts on the economy that may be caused by currencies” and added that “I hope it will correct a bit more”, suggesting that the government would at the least be looking for a level in USDJPY closer to 95 rather than 90. S.T.
AUDUSD (85.27) • AUD has remained strong today in the face of USD buying. Additionally, AUDJPY has pushed to a new one year high as it breaches the 85 level. This is a direct result of a combination of AUD strength over the past month and definite yen weakness. The pair’s MACD is showing that the uptrend’s momentum is continuing to build, and a close above 85 should do nothing but help the current trend extend itself. S.T.

Commodities

Oil ($82.65) • Crude is softer today after a very impressive run of 10 days of consecutive increase. DoE inventory data yesterday increased for the first time in five weeks which may cause some pause to the current bullish trend. S.T.
Suggested Reading
New finance minister favours weaker yen, Michiyo Nakamoto, FT (January 7, 2010) Fed officials worried over MBS pullback, Alan Rappeport, Krishna Guha, FT (January 6, 2010) China Raises Key Interbank Rate, Wang Ming, WSJ (January 7, 2010)





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The Plaza Futures Group



EL MUNDO Y LAS FINANZAS.

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FOPLADE- Análisis Financiero.

SOVEREIGN RISK BRIEFLY SHAKES EUR
• Currencies trade in tight range except for a weak yen.
.USDCAD’s move lower continues to be supported by strong fundamentals.
.EUR weakens on Stark’s view that the EU won’t save Greece, but then recovers.
.PBoC says they will leave monetary policy loose and the CNY “basically stable”.

FX Market Update

Most currencies today are gaining against the USD though not by a wide margin currently. This does not mean that there hasn’t been some significant volatility however as sovereign risk reared its ugly head once again with some comments from ECB member Stark suggesting that the market should not price in a high probability of EU support for Greece should it require a bailout. This weighed not only on EURUSD, but also caused some volatility in other major pairs.
• A subsequent statement from the People’s Bank of China helped to take a measure of sting out of the risk aversion theme that seemed to be creeping into global markets as the PBoC reiterated its aim to implement appropriately loose monetary policy and maintain the stability of macro policy. The market probably took more confidence in the PBoC pledge to “guide and urge” financial institutions from pursuing risky lending strategies and monitor real estate markets. Interestingly, the PBoC also included a comment on keeping CNY “basically stable” as part of its 2010 strategy, a comment that was absent from the previous November policy statement.
• Currently, the currency market is sitting with small gains by CAD, AUD and NOK while NZD is off mildly and JPY holds as the only currency to be losing ground.
• The reemergence of sovereign risk issues hits closely at a theme that we continue to think will be a crucial factor this year. Asset differentiation amongst investors on structural fundamentals will overtake the general thrust of risk-thirst style asset allocation that dominated so distinctly in 2009. In a year when all governments will see debt burdens rise substantially, the key differentiating factor will be to watch for those with a clear commitment to taper off fiscal stimulus and control deficits to ensure that measures do not bleed into creating worsening structural deficits, particularly for countries already facing pressure on their credit ratings. With the UK going into an election year we see additional risk on the fiscal side, underscored by the fact that large fund managers (highlighted in our recent notes and suggested readings), are beginning to shy away from the debt of countries like the UK and US. • Today we will see some important US data with ADP employment and ISM non-manufacturing coming out (see chart), along with the FoMC minutes from the December 16th meeting. With US short yields still elevated and pricing in more hawkish Fed expectations, we can still expect the balance of risk on the USD reaction to the data to be more “natural” with positive results providing USD support, and vice-versa for negative results. Employment was up in December’s manufacturing ISM read, so it bears watching both ADP and the service sector employment sub index for predictions of Friday’s non-farm data. S.T.

Americas

USDCAD (1.0380) • CAD is up 0.2% against the USD and is performing relatively well today. USDCAD 1-month 25-delta risk reversals continue to shift lower (see chart) as the market increases the relative price premium on USDCAD puts against USDCAD calls, a positive sentiment indicator for CAD. The interesting thing to note about CAD relative to the other commodity currencies (NZD, AUD) is the stability of the loonie’s performance over the past month. In fact, option implied volatility for CAD has set new 1-year lows, whereas AUD and NZD vol is still more elevated. These factors give us confidence in our view that USDCAD is eventually set to test the 1.0207 lows from 2009. Additionally, our short term valuation model (which includes a host of financial market variables) has shown USDCAD trading levels very well in line with fitted estimates since the mid December move lower in the pair, again providing confidence that this move lower is USDCAD in fundamentally supported. S.T.

Europe

EURUSD (1.4365) • EUR has had a volatile session, trading down below 1.43 only to recover back close to yesterday’s close. ECB member Juergen Stark’s comments that “the markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece”, put downward pressure on the currency. We think that the sovereign issues that face the Eurozone are now fairly well priced into the currency and that reactions from here will be more knee-jerk than lasting. However, Martin Wolf (see Suggested Readings) has an interesting comments on the hurdles that lie ahead for the Eurozone, which we think will begin to limit EUR upside late in 2010 and 2011. • Fundamental releases were mixed, with the PMI composite rising to an as expected 54.2; industrial new orders were disappointing, dropping -2.2% m/m; and the Eurozone PPI slipped down to 0.1% m/m. • Technically, the 200-day moving average (1.4244) has provided support over the last few weeks. We think there has been a sea-change in sentiment, but that most of that is now complete, which should leave EUR trading increasingly off fundamentals. We continue to believe that EUR will move higher this quarter. C.S.
GBPUSD (1.5990) • Sterling is entering the North American session essentially where it closed yesterday. • PMI services, an important gage for the MPC, came in as expected at a healthy 56.8. We think the BoE will remain more dovish than the other G7 central banks and that this will weigh on the currency. The BoE is widely expect to leave both interest rates and its asset purchase program on hold tomorrow. • GBP has been unable to mount a rally and continues to trade bearishly below its 200-day moving average of 1.6100. C.S.
USDISK (125.20) • Iceland’s finance minister has reiterated that the government will not default as speculation increases that the international bailout agreement to help Iceland may now be in jeopardy after the presidential veto of the depositor bill. Iceland was an important theme in yesterday’s trading. General sovereign risk will be an important theme in 2010. C.S.

Asia / Oceania

USDJPY (92.50) • USDJPY continues to trade firmly between its 100 and 200-day moving averages (90.61 and 93.53, respectively) and today has reclaimed most of yesterday’s losses. • There has been little reaction to news that the highly experienced Finance Minister Fujii’s health has deteriorated and he will retire and that Deputy Prime Minister Naota Kan will replace him. • The key driver for USDJPY continues to be the 2-year bond yield spread (see bottom chart). The 30-day rolling correlation has risen to 0.93, reflecting the importance of interest rate expectations on USDJPY. Accordingly, Friday’s release of nonfarm payrolls and its impact on Fed interest rate expectations will be a key risk for USDJPY traders. A worse than expected release would most likely create USDJPY selling on the back of expectations for the first Fed interest rate hike being pushed out farther into 2010. C.S.
NZDUSD (0.7325) • NZD was weaker in Asian and European trading due to a drop in milk prices, but has recovered most of its weakness and is now trading just 0.3% below yesterday’s North American close. C.S.

Commodities

Oil (81.70) • Oil struggled with a new high yesterday, but in the end was unable to push above the October $82/barrel oil price. Still oil above $80/barrel is bullish for CAD. C.S.
CRB (289.39) • The CRB index reached a new 14-month high of 290.47 yesterday, pushed higher by the ongoing rally across commodities. This is also bullish for CAD. C.S.

Suggested Reading

EUR Rattled as Stark Says EU Will Not Bail Out Greece, Jamie Chisholm, FT (January 6, 2010) US Slaps More Duties on Chinese Steel Products, Reuters (January 6, 2010) The Eurozone’s Next Decade Will Be Tough, Martin Wolf, FT (January 6, 2010) The Cause of Our Crises Has Not Gone Away, John Kay, FT (January 6, 2010) Britain Threatens to Freeze Iceland Out of the EU as Loan Payback Vetoed, S. Jagger and J. Sherman, Times (January 6, 2010)
Camilla Sutton, CFA, CMT Sacha Tihanyi
Currency Strategist Currency Strategist
Scotia Capital Scotia Capital
416-866-5470 416-862-3154
Camilla_sutton@scotiacapital.com Sacha_tihanyi@scotiacapital.com

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The Plaza Futures Group



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