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EUR-USD: In view of the political deadlock in the US and the open questions following the EU

summit the news flow on either side of the Atlantic remains the main driver of the markets.

German Minister of Finance Wolfgang Schäuble created uncertainty yesterday by stating that

the Federal government rejected “a carte blanche for widespread purchases on the secondary

market [on the part of the EFSF/ESM]“. Moreover he warned against the belief that one single

summit would be sufficient to end the confidence crisis in the euro zone long term. He was

probably speaking many market participants‘ minds. Meanwhile, Standard & Poor’s followedFitch and downgraded Greece to CC from CCC with negative outlook. The euro is turning into

a currency “non grata” at present. But things are not looking any better on the other side of the

Atlantic either: the political toing and froing about an increase of the debt ceiling continues and

the economic recovery remains subdued, as the Fed’s Beige Book underlined yesterday. Even

if the proposal brought forward by the Speaker of the House of Representatives John Boehner

was to be passed by the House today it will still have to be passed by the Senate. Should the

proposal – against all odds – be passed by the Senate, President Barack Obama has already

suggested that he will veto the bill. There is still no end in sight to the debate on the debt ceil-

ing, which means that the USD is in no better a position than the euro. Even if the euro is cur-

rently losing against the USD in the wrestling for position and EUR-USD has eased back from

above 1.45 to 1.4350, the Swiss franc is the real winner once again.

NZD: Telegraphic style or what? The RBNZ’s statement was extremely brief: “OCR unchangedat 2.5%; economy better than expected but global uncertainty highlights downward risks; rise in

inflation temporary due to general sales tax; little need to maintain the March “insurance” rate

cut if current global financial crisis recedes and economy continues to recover, but strong NZD

is acting as a drag on the economy and might reduce the need of further OCR increases in the

short term”. Stop. We have always been of the view that the RBNZ should quickly remove the

rate cut and should get active before the end of the year. Moreover it is likely to increase the

pace next year. Markets reacted with cautious optimism as they did not like the mention of a

strong NZD and the related softening of the hawkish statement. No reason though to come off

too far from recent historic highs in NZD-USD (0.8766). Like the aussie the kiwi is likely to

remain bid despite the general uncertainty surrounding the US and the Eurozone.

SEK: The SEK remains at the mercy of general market sentiment on the financial markets.

Following days of recovery it is again under pressure, since concerns about the debt crisis hasrisen again. Swedish economic data will only shift attention away from the all-important market

sentiment for a brief moment. Consumer and business sentiment will probably have fallen

slightly in July but remain on very high levels. Swedish consumers are likely to have had open

wallets in June so that retail sales should have recorded a notable rise following the rather

weak May. Unemployment on the other hand is likely to have risen in June. All in all a mixed

bunch of data. So markets will probably quickly refocus again on the decisive market sentiment

in EUR-SEK rather than worrying much about the data. Good support is currently located at

9.0450-9.0550 in EUR-SEK. Blips in EUR-SEK should run into resistance around 9.1580.

JPY: Slowly but surely USD-JPY is creeping south taking out one support level after the other.

Contrary to the situation in March when the currency pair collapsed by more than 4% in the

course of one day causing concerted G7 intervention the dilemma of the US debt ceiling is

allowing yen to appreciate gradually. The Ministry of Finance’s and central bank’s verbal inter-ventions are still as restrained as usual. According to Economics Minister Kaoru Yosano, he

prefers to wait for the outcome of the US debt ceiling issue before deciding on interventions. A

Daily Currency Briefing

Currency non grata

G10 Currencies

July 28, 2011

Antje Praefcke+49 69 136 [email protected]

Carolin Hecht+49 69 136 [email protected]

Antje Praefcke

+49 69 136 [email protected]

Antje Praefcke+49 69 136 [email protected]

8/6/2019 DCB 280711



28 July 20112

glance at the risk reversals illustrates that the downward pressure is increasing further in USD-

JPY. When the 1W risk reversals reached a similar level to the one seen now in mid-April USD-

JPY still had a downward move of 2.5% ahead of it. The risk of intervention is likely to rise

notably in particular should the speed of the yen appreciation increase. At present markets

seem to consider the 76 mark to be the pain threshold.

USD-JPY Risk reversals nose-dive

USD-JPY 1W RR, 25 ∆, percentage points annualised volatility; USD-JPY spot rate, daily

76

78

80

82

84

86

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11

-2,00

-1,00

0,00

1,00

2,00

USD-JPY (LS) 1W RR (RS)

Source: Bloomberg, Commerzbank Research

CZK: The central bank follows suit. Last week the government adjusted its growth outlook for

this year from 1.9% to 2.5% and now central banker Vladimir Tomsik suggested yesterday that

the CNB might also revise its growth outlook upwards from the current 1.5%. This was due to

the stronger than expected export demand from Germany, which was buoying the Czech

economy. But does bigger growth mean higher inflation and thus higher interest rates? Not at

all. Tomsik argues that the net exports are driving the appreciation of the koruna thus keeping a

check on inflationary pressures. Moreover the crisis in the European periphery might mean that

Eurozone interest rates will not be raised as rapidly as expected. That would keep the yield

differential between EUR and CZK on a low level thus providing further support for the koruna.

As a result Tomsik cannot even exclude that the rate hike cycle will not be initiated until next

year. This news did not shock the koruna and EUR-CZK breached the support level at 24.28

short term yesterday. Even if the uncertainty on the market is likely to lead to range trading in

EUR-CZK over the coming days, the koruna still has its fundamental strength up its sleeve

against the euro.

BRL: As the real rose from roughly 1.58 to around. 1.53 against the US dollar since last week it

is hardly surprising that the government used its box of tricks again to stop the appreciation of

the real. From now on the central bank can levy a tax on FX derivative transactions of up to

25%, although the tax is apparently initially going to amount to 1%. This announcement had the

desired effect short term and the real fell to 1.57 against the US dollar yesterday at the open-

ing. It is questionable though whether this tax will have a long lasting effect as previous meas-

ures did not prevent the real from appreciating notably against the dollar. While the environ-

ment remains positive for the real and the dollar remains under pressure due to the current

debt issues and the expansionary US monetary policy the real is likely to remain in demand.

The government might however have succeeded in stabilising USD-BRL at levels above 1.55.

Should today’s minutes confirm that we will see a break in the rate hike cycle, this might put

renewed pressure on the real today.

Emerging Market Currencies

Carolin Hecht+49 69 136 41505

[email protected]

You-Na Park+49 69 136 [email protected]

8/6/2019 DCB 280711



28 July 20113

Today’s Events

Time Region Indicator Period ActualOur

ForecastSurvey Last Direction Cross

00:50 JPY Retailtrade Jul mom +2,9 +1,5 +2,9

Jul yoy +1,1 -0,5 +1,1

08:30 SEK Unemploymentrate Jun 8,7 7,9

08:30 SEK Retailsales Jun mom +0,7 -2,3

Jun yoy +0,9 -1,1

10:00 EUR Consumerconfidence Aug -11,4 -11,4

Industrialconfidence Ju l 2,5 1,6 3,2

Businessconfidence Jul 104,0 1 04, 0 10 5, 1 EUR-USD

10:30 ZAR Producerpriceindex Jun mom +3,9 +0,4

Jun yoy +6,9 +6,9

11:59 RUB FXandgoldreserves Jul USDbn 528,5

13:30 USA Initialjoblessclaims Jul K 415,0 415 418 EUR-USD

15:00 USA Pendinghomesales Jun mom -2,0 -2,0 +8,2

Important Market Data

FX EUR-USD EUR-JPY EUR-GBP EUR-CHF EUR-CAD $ index

Current 1,4353 111,76 0,8793 1,1511 1,3625 74,13

Change (%) -1,10 -1,32 -0,59 -1,27 -0,53 +0,89

Last trading day's high 1,4536 113,22 0,8848 1,1644 1,3713 74,18

Last trading day's low 1,4340 111,95 0,8773 1,1505 1,3591 73,42

FX EUR-SEK EUR-NOK EUR-DKK EUR-HUF EUR-CZK EUR-PLN

Current 9,1243 7,7656 7,4516 268,59 24,257 4,0214

Change (%) +0,71 +0,08 -0,02 +0,24 -0,29 +0,56



FX EUR-AUD EUR-NZD EUR-BRL EUR-MXN EUR-TRY EUR-ZAR

Current 1,2989 1,6447 2,2325 16,7187 2,4279 9,5730

Change (%) -1,92 -1,33 +0,14 -0,90 -1,46 -1,29



FX EUR-RUB EUR-RON EUR-CNY EUR-SGD EUR-KRW EUR-THB

Current 39,6171 4,2407 9,2448 1,7260 1510,4045 42,6685

Change (%) -0,70 +0,21 -1,12 -1,13 -0,77 -0,89



Forwards / Options Fwd 3M Fwd 6M Fwd 12M Vol 1M Vol 3M Vol 12M

EUR-USD 1,4316 1,4282 1,4219 10,20 12,38 12,89

3M Money Market EURIBOR $ LIBOR ¥ LIBOR £ LIBOR CHF LIBOR CAD LIBOR

Rate (%) 1,61 0,25 0,20 0,83 0,18 1,18

Bonds / Bond Futures 10Y Bund 10Y T-Note 10Y JGB 10Y Gilt Bund Future

10Y T-Note

Future

Yield (%), Price 2,65 2,97 1,07 2,98 129,37 124,38

Equity Indices EuroStoxx50 DAX Dow Jones S&P 500 Nikkei 225 FTSE 100

Closing 2693,71 7252,68 12302,55 1304,89 9876,79 5856,58

Change -45,94 -96,77 -198,75 -27,05 -170,40 -73,15

Change (%) -1,68 -1,32 -1,59 -2,03 -1,70 -1,23

Oil / Prec.Metals Oil, Brent Oil, Nymex Gold Silver Palladium Platinum$ per unit 117,51 97,19 1614,95 40,42 825,75 1778,00

Industrial Metals Aluminium Lead Copper Nickel Zinc Tin

$ per ton 2622,5 2694,0 9736,0 24055,0 2487,0 28800,0

Sources: Bloomberg L.P., European Banking Federation, British Bankers Association,Dow Jones, Xetra, S&P, TSE, LSE, LME.

8/6/2019 DCB 280711


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