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DENVER, CO, USA - 12/22/98
SUMMARY
This morning's markets were fairly quiet, except for some action seen in
Japan's FX, equity and bond markets. In pre-Christmas trading, traders
seem to be happily ensconced in cautious trading after the extreme
volatility's since the start of this year. Commodity-based countries saw
their currencies slip as the CRB index hit fresh 21-year lows and Brent
reaching 12-year lows yesterday.
EUROPE:
Tight ranges prevailed overnight for European currencies against the U.S.
dollar in the wake of the impeachment vote and the surprise rally in the
Dow. The S&P and NASDAQ indices climbed to record highs. In Germany, two
states reported lower COL (cost of living) statistics. The Hesse and
Bavarian regions reported 0.5% Y/Y and 0.3% Y/Y respectively.
ASIA:
Dollar/Yen rose almost two yen on news that the Ministry of Finance's Trust
Fund would stop outright JGB (Japanese government bonds) buying. This
caused supply concerns and immediately the yields surged 40 bps. The Nikkei
lost 373 points and fears are renewed that Japan's recession may be
prolonged.
NORTH AMERICA:
Markets are expecting a neutral stance by the FOMC today as it meets to
decide on its monetary policy. To date, the Federal Reserve has lowered
interest rates three times in just seven weeks to ensure a soft landing for
the U.S. economy given the turmoil which has roiled other markets in Asia,
Russia and Latin America. The Mexican peso has weakened slightly this
morning on profit-taking and delays seen in approving the country's 1999
budget.
Richard Chehovin
President Chief Currency Trader
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