Japanese Yen Faces Summer Sale

Lior Alkalay - INO.com Contributor - Forex

The Yen is vulnerable. Yields on Japanese 2-year sovereign bonds are as low as -0.26%, inflation is persistently low (and seems likely to stay that way for a while) and GDP tilts from contraction to expansion and, in aggregate, barely grows. Currencies such as the US Dollar, the Pound Sterling, and even the Mexican Peso provide plenty of reasons to buy them over the Yen, and yet, the Japanese Yen holds sway. The reason? Global Stocks are underperforming.

Japanese corporations are basically cash machines, hoarding vast amounts of cash that they need to invest. The problem is that Japanese corporations’ default choice has always been buying the highly liquid Japanese sovereign bonds, despite their ridiculously low yields. If market sentiment is upbeat, if stocks perform well, and the global economy seems stable, Japanese corporations are willing to take the risk and store their cash in foreign assets, thus pushing the Yen lower. Continue reading "Japanese Yen Faces Summer Sale"

Fed Rate Hike Could Come in November

Lior Alkalay - INO.com Contributor - Forex

Once again a Fed rate decision is coming. Yet, unlike the rate decision in September, investors are at ease. Recently, we've seen disappointing non-farms, weak retail sales and plunging new home sales. So, given that, it would seem that the Fed's decision is obvious. Of course, investors have come to the conclusion that a rate hike won't be coming. But investors are wrong, both in the perception of a soft US economy and in their conclusion.

Housing Market Not Really Weak

The first argument that Fed doves are using is the weak new home sales figure. It's true; the figure did undershoot. But take a look at US housing in the global scheme of things. It means nothing. In fact, the US housing market is actually getting stronger.

Here's why… Continue reading "Fed Rate Hike Could Come in November"

I'm Still Not Sold On A 2015 Rate Increase

George Yacik - INO.com Contributor - Fed & Interest Rates

The consensus market opinion after last week's Federal Reserve monetary policy meeting is that the Fed will start to raise short-term interest rates sometime this year, maybe twice, beginning most likely at its September meeting.

I, for one, am still not sold that that will happen.

Last Wednesday's announcement following the Federal Open Market Committee meeting said not much of anything, especially when it came to signaling when it might finally begin interest rate lift-off. The statement gave the usual yadda yadda that economic activity "has been expanding moderately" and that "the pace of job gains picked up." But nothing about rates, other than the usual verbiage that the current federal funds target range of zero to 0.25% "remains appropriate."

Instead, analysts, journalists and investors were forced to look for clues in the "Fed dots," which show graphically where the 17 individual FOMC members expect interest rates to be by the end of this year, next year, 2017 and beyond. Continue reading "I'm Still Not Sold On A 2015 Rate Increase"