Yen is a Chosen One

As we round out the year there are only a few currencies that investors are gravitating towards, and one of them is the yen. The Aussie seems to have become afflicted by its strong association with China and her ‘softer’ data. The EUR is a story onto itself, a currency few are willing to handle. The Swiss has a central bank, the SNB, which investors believe they have successfully fine tuned the second guessing of both Hildebrand’s fiscal and monetary policies. The truth, even the SNB seems to be afraid of its own shadow. A “ceiling to be or not to be” is hurting the short Swiss positions at the moment. The SNB and BoJ have a tough battle ahead. Both Central banks have tried to think outside the box on how to dissuade investors from hoarding their respective currencies during times of economic stress.

Below are some other highlights of the week:


  • AUD: Housing finance unexpectedly rose (+0.7%), but the details were weak, the value of loans for investment fell -5.5%, mom, while owner-occupied home loans value fell -1.2%, mom. The trade surplus also fell to a seven-month low of +$1.6b in October. Higher beta currencies remain under pressure.
  • CNY: Last weekend, Chinese data showed that their export growth fell to +13.8%, y/y, in November from +15.9%. On the flip side, import growth slowed but is still a robust +22.1% on the year. This has pushed the 12-month rolling trade surplus down to $154b from $163b in October.
  • CNY: China’s President Hu over the weekend vowed to pursue a more balanced trade account with emphasis on increasing imports.
  • The INR has come under pressure this morning on two news reports. The first indicated that the Indian government is backtracking from retail liberalization, and the second involved an admission from the commerce secretary that the value of exports has been overstated by slightly more than \$1bn a month over the past eight months, adding to concern about the widening balance-of-payments deficit. We estimate that this cuts January-October export growth from 49%yoy to 44%yoy and increases the trade deficit by about 0.4% of GDP to about 5.4%.
  • INR: India’s IP fell -5%, y/y, in October from +2%, and much lower than consensus of -0.7%. Growth is clearly slowing.
  • AUD: The NAB Australia business confidence index was unchanged at 2 in November. Business conditions improved to 1 from -1, likely due to the RBA cut in November.
  • PHP: Philippine exports growth rose to -14.6%, y/y, in October from -27.4%, better than the consensus forecast of -16.5%. Analysts note that the improvement in exports and seasonally strong remittance flows should support the PHP heading into year-end. Remittance flows will be missed in Q1.
  • INR: Indian WPI inflation fell to 9.1%yoy in November from 9.7%yoy in October, just slightly higher than the consensus forecast of 9.0%yoy. We doubt this will be sufficient to lead the RBI to begin cutting policy rates at Friday’s policy meeting despite the sharp slowing in growth. With the trade deficit deteriorating, the rupee is likely to remain vulnerable to developments in Europe.
  • CNY: The HSBC China flash PMI rose +1.3pts this month to 49 and in line with the seasonal trends. This would suggest that growth continues to slow but may not be heading into a “hard landing”.
  • SGD: Retail sales rose a much higher-than-expected +8.5%, y/y, in October versus the consensus forecast of +1.3%. Analysts note that the latest government measures to cool the property markets and target slower GDP growth are likely to have an impact on inflation further down the line.
  • JPY: The BoJ tankan report showed that business sentiment amongst large manufacturers fell to-4, worse than the expected-2. The effects of a high yen and a slowdown in overseas economies continue to weigh on Japanese sentiment. This is the first dip from the index into negative territory since the earthquake.
  • INR: The currency is benefiting from the RBI’s measures to stem rupee weakness. Central Bankers kept rates unchanged and introduced measures to stem speculation in the INR. The tone in the policy statement has become more dovish.
  • IDR: Fitch raised Indonesia’s sovereign rating to Investment Grade, moving ratings to BBB- from BB+. The market had been expecting this.






  • Business confidence reports come to us from NZD and GER
  • Monetary Policy minutes are released in GBP, AUD and JPY
  • Inflation is recorded in GBP and CAD
  • GBP and NZD show us their Current Accounts
  • Building permits and Home sales are delivered in the USD
  • GDP comes to us from CAD and NZD
  • CAD announces its core-retail Sales while the US delivers Durables


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