The Japanese yen slumped for a 5th consecutive day against the U.S. Dollar on Wednesday, as U.S. two-year Treasuries reached a spread over Japanese bonds that was the highest in six months. The Dollar was increasingly buoyed by more positive news in the U.S. housing sector, showing existing home sales driving up at the fastest clip in 2 years, which worked in lockstep with gains on U.S. Treasury yields to push the greenback up another %0.75 percent in the USD/JPY currency pair. Hitting above the psychologically key 80.00 yen mark, the dollar reached a daily high of 80.42 yen before slipping back just slightly to 80.33. Aided by the fallout from the Bank of Japan’s intervention in currency markets last week, as well as a decreased outlook for growth and exporting in Japan, almost every major currency made forward progress against the yen today, with the Euro rising %0.85 percent to 106.43 yen, and the Swiss Franc gaining nearly a full percent to hit 88.25.
The British Pound also suffered heavy losses today, as the Bank of England meeting minutes released today showed that a pair of Monetary Policy Committee Members had worked towards adding a further 75 billion pounds to their quantitative easing program versus the 50 billion called for by their peers. The market realization that some U.K. MPC members had worked towards adding even more stimulus to the economy in light of analyst’s predictions that the scope of monetary infusion would actually be reduced should find the Pound lacking support through the rest of the week to come. Against the Euro, Sterling declined three-quarters of a percentage point to EUR/GBP=0.8451, off 62 pips on the day as a whole. While the Pound traded almost flat against the Japanese yen, it suffered losses in cable falling to GBP/USD=1.5680 (down 100 pips), and plummeted 129 pips on the day against the Swiss Franc (GBP/CHF=1.4268).
The Swiss Franc, in rare form, advanced against all its major currency counterparts today, as Euro-area data showed that increasingly the region is in danger of slipping into recession. Both the services and manufacturing sector for the region were shown to be in decline, and the purchasing managers’ indices for Germany and France, the most powerful economies in the EU, showed weak activity for the core producers of the Euro-zone. As such, and despite the Euro’s ascent riding the positivity of the Greek bailout deal, the Swiss Franc returned to being the safe-haven currency of choice on Wednesday, rising %0.20 against the U.S. Dollar (USD/CHF=0.9105), and making solid gains against the Japanese yen to the tune of a %0.93 rise (CHF/JPY=88.22, up 83 pips). With market indicators looking poor for the Euro to be supported much longer once the hangover from the Greek bailout wears off, and with global economic growth looking to be hampered by increasing oil prices as well as slower growth in China, the Swiss Franc’s decline in currency markets appears to be coming to an end despite the Swiss National Banks’ best efforts to peg the safe-haven currency against the Euro over the past few months. Expect the Swissie to be an increasingly good long-term bet this year as the outlook for global growth looks increasingly less optimistic.
