Currency Briefing - what you need to know for Fri April 20, 2012

The local currency held steady against the US dollar, trading at $1.2511.

IG Markets Singapore said:

The Singapore dollar has held steady against the greenback as investor sentiment in Asian currencies remains resilient.

The local currency is trading at $1.2511 as it continues to move in a tight band against the US dollar. It did briefly dip to $1.2477 earlier this week but gave up this gains soon after.

Risk sentiment has been patchy at best this week with weaker data from the US affecter traders’ feelings towards riskier assets.

But the Singapore dollar is less susceptible as the local economy is solid and the currency is on a path of gradual appreciation.

Traders were eased last night by a smooth Spanish debt auction which saw strong demand although yields edged up.

GFT meanwhile noted (for April 19 2012 trading):

While the Japanese yen traded lower against the U.S. and European currencies, it held steady against the comm. dollars. The improvement in market sentiment coupled with the deterioration of Japan’s trade number has shunned traders away from the country’s currency.

While Japan reported the fastest export growth in a year, the highest record trade deficit raised some alarming signs for world’s third largest economy. According to Ministry of Finance, the increasing reliance on fossil fuel could be one of the main factors in the 0.62 trillion yen deficit.

Despite the uptick in automobile exports, Japan saw an increase of 29.5 percent in mineral fuel import. The data pointed to a possible oncoming energy crisis in the country as all but one of the country’s nuclear plants remain offline.

Although the future crude oil price has come off of its high in March amid easing tension in Iran, the recovery in Japanese economy could face more headwinds as the energy demand picks up in the summer. The shortage of power and the yen’s rise are making it more difficult to do business in Japan driving more firms to look for oversea investment.

Meanwhile, the Bank of Japan remains dovish and open to the idea of supplying more monetary stimulus.

RBS, on the other hand, reported (for 19 April 2012 trading):

The Friday data calendar is headlined by the G20 meeting of Finance Ministers and Central Bankers, and it appears that expectations for a commitment to upsize the IMF have increased over the past few days. Indeed, IMF head Lagarde said she expects the IMF's firepower to be significantly increased.

At their last meeting in February, the finance ministers and central bankers said an upsizing of the EU bailout fund (which was completed in late March) was deemed "essential input" for considering greater IMF resources. While headlines may leak out over the course of the day, the finance ministers and central bankers normally release a communiqué following the meeting. The US (and increasingly Canada) have been vocal about not seeking further IMF funds.

The April German IFO survey is due and we expect a decline in the headline index after the ZEW survey surprised to the upside, which will likely lead to EUR downside. Our EU Economics team in their latest GDP tracker has revised down their estimate for 1Q GDP growth to -0.2% q/q, indicating a recession in the Euro-zone.