No BoJ Action just a Survey

Central Banks are thinking outside the box this week, with one aim in mind, and that’s to cheapen their own currency. Unless of course you happen to be in the emerging market category. On Friday morning there were rumors that the SNB was about to change its floor. This certainly spooked an already nervous market that has been busily applying risk aversion trading strategies for most of the week. “Viral” is a cheap way to get your business concluded. Japan on the other hand uses surveys.

On Thursday the BoJ sent out a questionnaire to major banks asking whether they can help it intervene in the currency markets overseas. This action certainly caused a reaction amongst market participants.

The fundamental arguments for JPY appreciation remain very much intact – Japan is “a current account surplus economy with a large surplus net international investment position”. The survey represents a new tactic to rein in the yen. Japan has intervened four times in the past year with varying degrees of success. To curb the value of the yen that’s seen as a safe haven amid global turmoil is difficult. The strength of it continues to cause serious harm to the country export dependant economy. At least the MoF and BoJ can control their perception of being seen to be doing the right thing!  


Below are some other highlights of the week:




  • JPY: Japan’s trade deficit was a much larger than expected -JPY457b last month. Exports fell -3.5%, m/m, while imports rose +2.8%, m/m. Yen’s strength continues to be driven by increasing repatriation due to very low yields abroad and poor risk appetite.
  • SGD: Singapore reported stronger headline Q3 GDP (+1.9% vs. flash +1.3%), but weak details and a softening outlook. Almost all of the strength came from “biomedicals”, while most other sectors of the economy weakened. Analysts expect Singapore’s economy to contract about -3%, q/q, in Q4 before recovering in Q1 2012. With inflation to remain elevated (+4% in 2012) the MAS could shift the SGD NEER to a neutral stance.
  • JPY: Finance Minister Azumi dismissed calls from politicians for the BoJ to intervene by buying JPY50t of foreign currency bonds. He indicated that this would be against the current concept for intervention. Intervention in Japan is funded through t-bills issuance by the MoF but executed by the BoJ.
  • JPY: The Nikkei suggested that the Government Pension Investment Fund and Post Bank should buy more foreign bonds as an intervention alternative. Repatriation due to very low yields abroad and poor risk appetite continue to support the yens appreciation.
  • NZD: RBNZ inflation expectations fell to +2.8% over two-years in Q4 from +2.9% in Q3 and to +2.7% over one-year from +2.9% in Q3. This suggests that policy makers could keep the official cash rate unchanged until June 2012 (+2.5%).
  • In mid-week, the INR and IDR underperformed other Asian currencies despite BI intervening in spot FX and verbal intervention by the RBI. India’s deputy governor said that the RBI is weighing the possibility of taking action to stem further weakness in the INR.
  • PHP: Dollar Peso remains under pressure from inflows related to MSCI re-weighting and seasonally strong remittances.
  • CNY: HSBC China flash PMI fell -3.1pts to 48.0 this month, much weaker than the seasonal fall of -1.3pts. Analyst do note that the HSBC PMI has not been correlating well with the official PMI, and suggest that the decline may be somewhat exaggerated. Capital markets believe that China’s growth is “slowing but is not heading for a hard landing”. Monetary policy is expected to remain prudent, with easing only in selected sectors. The market can only hope so.
  • AUD: Construction work done surged +12.5%, q/q, in Q3 (strongest in 25-years). It was mostly driven by the mining project pipeline. The release is to lift Q3 GDP growth substantially on December 7 and analysts suspect that it could make rate decision announcement on December 6 more difficult. Expect a worsening Europe and softer China to influence a “rate change”. The OIS market is pricing -33bps of cuts.
  • AUD: The Aussie parliament passed the mining tax in the lower house of parliament (still needs to pass upper house, however there is a majority). Is this pressurizing the AUD?
  • INR: The RBI has intervened to push dollar rupee down. Intervention was estimated to be around +$2b. Market expects the INR to remain under downward pressure until the RBI takes more aggressive measures to “increase incentives for capital inflow and discourage importer hoarding of funds”.
  • SGD: Singapore’s inflation was +5.4%, y/y, in October, down only marginally from +5.5% in September and above expectations for a drop to +5.2%. The core rose to +2.3%, y/y, from 2.1% (the highest rate in five-months).
  • MYR: Malaysia CPI inflation was unchanged at +3.4%, y/y, last month, slightly higher than the consensus forecast of +3.3%.
  • JPY: Traded to a high of 77.6 after a warning from S&P on Japan’s sovereign rating, which has been on negative outlook since April 2011. However, the fundamental arguments for JPY appreciation remain very much intact – Japan is “a current account surplus economy with a large surplus net international investment position”.
  • PHP: Trade deficit widened. Strong import growth of +11.7%, y/y, in September vs. +10.4% in the prior month and still weak exports drove a widening of the trade deficit to $10b on a 12-month rolling basis from $8b. Analysts are now waiting for the “remittance” season al flows.
  • SGD: IP rose a very strong +24.4%, y/y, last month, much higher than the consensus forecast for +8.1%. This was primarily driven by the 112.3%yoy surge in biomedical output.

Other Links:
Americas Week in FX



  • Economic, business and confidence facts come from the USD, CHF and NZD
  • Housing and building data is reported from the US, AUD, NZD and GBP
  • CAD gives us her monthly GDP release
  • Manufacturing PMI is delivered from CNY, USD and GBP
  • AUD reports private Capital Expenditure and Retail Sales
  • GBP has its inflation hearings
  • The week ends with the employment situation in CAD and USD


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell