TOKYO, Sept 16 (IFR) 12:45amCDT
BOJ Speak
Over Reuters. BoJ Governor Kuroda reiterated that Japan has been on a path towards the 2% price target but we are
only halfway there. He also noted that the virtuous cycle from income to spending has been operating steadily in both
household and corporate sectors. As his comments were basically in line with what he had said earlier, markets have
shown no major reaction. Takahiro.Okamoto@thomsonreuters.com Copyright (c) 2014 Thomson Reuters –
IFRMarkets
By James Glynn 12:54amCDT
RBA Speak AUD Reaction
SYDNEY--The Australian dollar rose strongly Tuesday, buoyed by a surge in iron-ore prices and the central bank's
growing concerns about housing prices. At 0515 GMT Tuesday, the Australian dollar was changing hands at
US$0.9013, compared with US$0.8996 late Monday. It traded as high as US$0.9054 in Asia. Iron-ore prices jumped
3.9% in line with gains in steel prices overnight. Steel makers are building stockpiles ahead of China's National Day
holiday in October, Commonwealth Bank of Australia analyst Lachlan Shaw said. Still, the price of iron ore, the
country's biggest export, remains around its lowest level in five years, which has contributed to heavy selling of the
Australian dollar in the last week.
In minutes of its Sept. 2 policy meeting, the Reserve Bank of Australia ramped up concerns about house-price growth,
which economists said showed the chances of a further cut in interest rates were slim. "Additional speculative demand
could amplify the property price-cycle and increase the potential for property prices to fall later," the RBA said.
Australian capital-city house prices have risen by more than 10% over the past year, with major cities like Sydney
posting gains closer to 15%. "Booming house prices are a key reason why the RBA is unlikely to cut further and may
see the RBA needing to lift rates earlier than the market is currently pricing," said Paul Bloxham, chief economist at
HSBC in Australia. The central bank has held its cash-rate target at 2.5% for more than a year to cushion the economy
against the slowing of a decade long boom in mining investment. So far, there has been little to show for it other than
the sharp rise in house prices. David de Ferranti, market analyst at FXCM, said there were bigger forces massing
against the Australian dollar that would overwhelm the diminished expectations of another rate cut.
"While the domestic rate outlook is supportive for the Aussie, the currency still faces downside risks from other
sources," he said. "The greatest threat is a continued ramp up in volatility to catalyze a mass unwinding of carry
trades." Earlier Tuesday, RBA Assistant Gov. Chris Kent said the Australian dollar remains highs and is acting as a
hand brake of the economy still. Speaking at a business conference in Sydney, Mr. Kent said: "The still-high level of
the exchange rate may be weighing on investment of firms in the traded sector," he said. Write to James Glynn at
james.glynn@wsj.com (END) Dow Jones Newswires
0755 GMT [Dow Jones] 2:55amCDT
SNB Speak
The Swiss National Bank won't resort to negative interest rates to defend its floor of CHF1.20 per euro although it will
continue to use the threat of such measure to deter buying of the franc, according to St. Gallen Kantonalbank.
"Negative rates aren't a suitable means of defending the SNB's minimum exchange rate, and only direct currency
market intervention will achieve this goal, as past experience has clearly shown," says analyst Thomas Stucki, a former
SNB employee responsible for managing the central bank's currency reserves. The SNB meets Thursday to review
monetary policy, with a decision due at 0730 GMT. (neil.maclucas@dowjones.com) Contact us in London. +44-207842-9464 markettalk@wsj.com (END) Dow Jones Newswires
OSAKA, 3:00amCDT
BOJ Speak II
Japan--Bank of Japan Gov. Haruhiko Kuroda said on Tuesday that a weakening of the yen didn't pose a problem for the
economy as long as the move was gradual and reflected economic fundamentals. Mr. Kuroda's comments were the
latest indication of his tolerance for the recent depreciation of the yen, but his reference to the need for stability was a
nod to concerns among some businesses that a further fall in the currency would hurt them through higher import costs.
"It's not surprising to see the dollar rising mildly against the yen in a way consistent with economic and financial
fundamentals," Mr. Kuroda told a news conference in the western city of Osaka where he was visiting for talks with
local business leaders. He said that such a move, resulting from differing monetary policies between Japan and the
U.S., was natural, and added: "Such a rise won't pose particular problems." While executives in the region--home to
some of major electronics makers such as Panasonic and Kyocera--welcomed a correction to the yen's excessive rise
over the past two years, some worry that a weaker yen would raise import costs and squeeze profits. "I am concerned
that the negative aspect of imported prices on the economy could become pronounced," Shigetaka Sato, head of Osaka
Chamber of Commerce and Industry, told Mr. Kuroda in their meeting earlier in the day.
In response, Mr. Kuroda said currencies must move in a stable manner, something he had not mentioned since first
disclosing his acceptance of a weaker yen earlier this month, which pushed up the dollar to a six-year high against the
yen and invited concerns about a rapid fall in the yen. "I totally agree that stability in currency rates is extremely
important to businesses," he told executives.
Mr. Kuroda said while the U.S. Federal Reserve is scaling back its monthly bond purchases and U.S. interest rates will
eventually rise, the BOJ remained committed to its aggressive easing to achieve 2.0% inflation. Asked whether his
comments on the weak yen and currency stability were contradictory, Mr. Kuroda said that stability didn't mean that the
currency stayed at the same level regardless of changing economic conditions.
Currency traders are focusing on a two-day policy setting meeting by the Federal Reserve starting Tuesday for clues as
to when the Fed may begin to raise rates.
Mr. Kuroda offered businesses assurance that the central bank won't hesitate to take fresh easing action if needed to
achieve its inflation target and get the economy out of years of deflation. In attempting to demonstrate that the
economy is continuing to recover moderately, despite a sharp annualized 7.1% contraction in the April to June period,
Mr. Kuroda cited a different figure, pointing out that the economy grew an annualized 1.0% in the first half of this year
from the previous six months. Write to Tatsuo Ito at tatsuo.ito@wsj.com (END) Dow Jones Newswires
By Nicholas Winning and Matthew Cowley 3:30amCDT
U.K. CPI Slips
LONDON--The U.K.'s inflation rate dipped unexpectedly in August, suggesting the Bank of England will be in no
hurry to raise interest rates even though the economy is growing at a solid rate, official data showed Tuesday.
The annual rate of inflation fell to 1.5% in August from 1.6% in July, the Office for National Statistics said. That
equals the rate seen in May, which marked the lowest level since October 2009. Economists were expecting the
inflation rate to remain steady in August, according to a survey by The Wall Street Journal. The headline inflation rate
has been below the Bank of England's 2% target every month this year. In a sign that there is little inflationary pressure
in the pipeline, prices at the factory gate, or output producer prices, were 0.3% lower on the year in August. Companies'
raw material costs, or input producer prices, were 7.2% lower on the year, the ONS said. Write to Nicholas Winning at
nick.winning@wsj.com and Matthew Cowley at matthew.cowley@wsj.com (END) Dow Jones Newswires
By Paul Hannon 4:00amCDT
Eurozone Wage Growth
Wage growth across the 18 countries that share the euro picked up in the three months to June, as did total labor costs,
both signs that inflationary pressures in the eurozone may be set to pick up. Figures also released by the European
Union's statistics agency Tuesday showed the job vacancy rate was unchanged at 1.7%, suggesting that the
unemployment rate is unlikely to fall significantly in coming months. Eurostat said workers' pay was 1.2% higher in
the second quarter than in the same period of 2013, having risen by 1.0% in the three months to March. Total labor
costs--which include tax and other costs to employers--rose 1.2%, having increased by 0.6% in the previous period.
Wage growth outpaced the rise in consumer prices during the second quarter, a development easing a squeeze on
household finances that has undermined the currency area's prospects for a strong economic recovery.
The pickup in wages and total labor costs will give some encouragement to members of the European Central Bank's
governing council, since it suggests underlying inflationary pressures may be on the rise, albeit slowly. The eurozone's
annual rate of inflation fell to 0.3% in August from 0.4% in July, taking it further below the ECB's target of just below
2%.
Modest wage rises reflect the fact that unemployment across the currency area remains close to record highs, while
varying widely between countries and regions. The unemployment rate was unchanged at 11.5% in July, and business
surveys point to only modest further drops in the months ahead. A number of eurozone members recorded wage
declines during the second quarter. Cyprus recorded the largest drop, with wages down 4.5%, but there were also falls
in Ireland, Italy and the Netherlands. Wages rose 1.6% in Germany, and slightly less rapidly in Spain. That suggests
that the eurozone continues to rebalance through different rates of wage growth. Deprived of the ability to devalue their
currency, troubled eurozone members have tried to regain competitiveness lost in the years running up to the financial
crisis by cutting their labor costs relative to stronger northern European economies, a process known as "internal
devaluation." However, the Organization for Economic Cooperation and Development earlier this month warned that
strategy may now be proving counterproductive, failing to create new jobs while reducing overall demand and
contributing to the problem of very low inflation. Write to Paul Hannon at paul.hannon@wsj.com (END) Dow Jones
Newswires
[Dow Jones] 4:00amCDT
German ZEW Down
Germany's ZEW survey index fell to 6.9 in September from 8.6 in August. That's slightly better than the 5.0 reading
that forecasters had expected. The current conditions index tumbled to 25.4 from 44.3, pointing to ongoing weakness in
Europe's largest economy this quarter after a contraction in GDP during the second quarter. Still, economists typically
don't attach much relevance to ZEW as a gauge of economic activity, given that survey respondents are financial
analysts and investors as opposed to business people. Still, the index has taken on greater importance in recent months
given the geopolitical tensions in Russia and Ukraine that pose downside risks to the euro bloc's already fragile
economy. (brian.blackstone@wsj.com) Contact us in London. +44-20-7842-9464 markettalk@wsj.com (END) Dow
Jones Newswires
By Tess Stynes 6:45amCDT
ICSC/Goldman Slips
The International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index fell 2.6% in the
week ended Saturday from the previous week on a seasonally adjusted, comparable-store basis. "This past week saw
the tail end of back to school demand and is still a bit before fall apparel demand will fully kick in," according to
Michael Niemira, ICSC vice president of research and chief economist. On a year-to-year basis, the weekly reading
rose 3%. Mr. Niemira continues to expect same-store sales for the month will increase 4% to 5%.
Week Ended Index Yr/Yr Change Weekly Change
13-Sep-14 561.2 3.0%
-2.6%
06-Sep-14 576.0 4.0%
0.7%
30-Aug-14 571.8 4.8%
0.0%
23-Aug-14 571.7 4.2%
0.6%
Write to Tess Stynes at tess.stynes@wsj.com (END) Dow Jones Newswires
1221 GMT [Dow Jones] 7:21amCDT
EUR Commentary
The euro is bouncing back following the decision of the Ukrainian parliament to grant greater autonomy to the Eastern
regions. The currency is now at 1.2948 against the dollar. "This is partially meeting Russia's demands and could mean
more sustained abatement of geopolitical risks," says Citigroup's strategist Valentin Marinov. He adds that on the back
of the ceasefire negotiated a week ago or so, this could help the euro and European currencies regain some ground.
(chiara.albanese@wsj.com @chiaraalbanese) Contact us in London. +44-20-7842-9464 markettalk@wsj.com (END)
Dow Jones Newswires
7:12amCDT Clockwise: AUD/USD, GBP/USD, USD/CHF, EUR/USD, USD/CAD, USD/JPY, EUR/CHF
By Jonathan House and Sarah Portlock
CPI Unchanged In August
WASHINGTON-A gauge of U.S. inflation was unchanged in August, a sign that price pressures remain tame amid
subdued economic growth. The producer-price index for final demand, which measures changes in the prices firms
receive for their goods and services, was unchanged on a seasonally adjusted basis from a month earlier, the Labor
Department said Tuesday. Excluding volatile food and energy categories, prices rose 0.1%. Economists surveyed by
The Wall Street Journal had forecast that producer prices would be unchanged in August. August producer prices rose
1.8% over the same period a year earlier. Prices rose at an 1.7% annual rate in July and by 1.9% in June. The report
will likely reassure Federal Reserve officials that inflationary pressures remain tame as they start two days of meetings
Tuesday. The Labor Department's producer price index report can be accessed at: http://www.bls.gov/ppi
Write to Jonathan House at jonathan.house@wsj.com and Sarah Portlock at sarah.portlock@wsj.com (END) Dow
Jones Newswires
By Paul Vieira 7:30amCDT
CAD Manfacturing Shipments Up
OTTAWA--Canadian manufacturing shipments rose in July at their fastest pace in three years to a record level, on the
strength of demand for motor vehicles and primary metals, Statistics Canada said Tuesday. Factory sales surged 2.5%
to 53.66 billion Canadian dollars ($48.56 billion), whereas market expectations were for a 1.1% advance, according to
economists at Royal Bank of Canada. The level of sales represents a fresh high, overtaking the previous record set in
July, 2008, or months before the onset of the global financial crisis. July's increase marked the sixth advance in seven
months. Also, June's manufacturing sales were revised higher, indicating an advance of 0.9% versus the previous
estimate of a 0.6% gain. Volumes rose by a healthy 2.8% in the month. Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
7:41amCDT Clockwise: AUD/USD, GBP/USD, USD/CHF, EUR/USD, USD/CAD, USD/JPY, EUR/CHF
8:46 EDT 7:46amCDT
As Canada's factory sales blew past expectations in July, it adds to evidence that Canadian producers are taking
advantage of a weaker loonie versus the US dollar, as well as improved demand from America. The Bank of Canada
has waited patiently for exports and business investment to drive growth, taking over from debt-laden consumers, and
factory sales in July finally topped pre-crisis highs. The data suggest the BoC's bet is starting to pay off. Gov. Poloz
speaks later today on foreign-exchange rates and their influence on monetary policy. (paul.vieira@wsj.com;
@paulvieira) (END) Dow Jones Newswires
1257 GMT 7:57amCDT
GBP Commentary
The pound remains under pressure ahead Thursday's referendum on Scotland's independence that polls suggest is still
too close to call. The pound is now at 0.7997 against the euro and around 1.6192 against the dollar. The Commitment
of Traders report from the CFTC at the end of last week also showed speculative participants bought sterling in size
until Sept. 9, a couple of days after the YouGov poll showed the nationalists (yes) ahead. (chiara.albanese@wsj.com
@chiaraalbanese) Contact us in London. +44-20-7842-9464 markettalk@wsj.com (END) Dow Jones Newswires
9:54 EDT 8:54amCDT
Oh Brazil!
Presidential candidates are often pressured to detail specific proposals, and sometimes there's hesitancy because it could
backfire. As Marina Silva erased incumbent Dilma Rousseff's lead in Brazilian polls, the Rousseff camp opened fire
against some of Silva's proposals. One of them is central-bank autonomy, of which Silva has pledged to grant more of.
"In the hands of the Rousseff campaign, this technical proposal was transformed into TV ads where Silva is accused of
handing over monetary policy to bankers," notes Nomura's Tony Volpon. "This negative campaign has had an
impact...among the poor, less-educated segment of voters." Nonetheless, he expects Silva to be elected.
(paulo.trevisani@wsj.com; @ptrevisani) (END) Dow Jones Newswires
10:10 EDT 9:10amCDT
Fed Commentary
Fed officials are debating whether to raise interest rates at a gradual pace once they decide to tighten monetary policy
or be slightly less predictable and more aggressive than officials were pre-housing bubble. Kathy Bostjancic at Oxford
Economics says the latter scenario would not be ideal for the economy, but would not completely derail the recovery
either. "A bond- and equity-market selloff would restrain US economic growth and thwart an expected acceleration to
3%. However, it would not produce a recession or an equity bear market. The financial-market performance would be
reminiscent of 1994, when the rapid pace of Fed tightening surprised the markets." (pedro.dacosta@wsj.com)
(END) Dow Jones Newswires