Yen plummets on forceful BoJ action forecast

Updated 18 January 2013

Yen plummets on forceful BoJ action forecast

NEW YORK: The yen tumbled yesterday as investors soured on the currency in anticipation of aggressive policy easing by the Bank of Japan next week while the euro thrived as a series of strong sovereign bond auctions allayed fears about the region’s three-year-old debt crisis.
The dollar appreciated against the yen after sinking for two straight sessions, returning to a trajectory firmly in place since the fourth quarter of last year on expectations that Japan’s new government will be more forceful in its actions to bolster its beleaguered economy.
The yen resumed falls in Asian trade, erasing some of its gains in recent days, after Japan’s Economics Minister Akira Amari was quoted as saying that his remarks on Tuesday about the negative impact of excessive yen weakness had been misinterpreted.
The dollar rose as high as 89.56 and last traded at 89.38 yen, up 1.1 percent on the day, within striking distance of Monday’s 2-1/2-year high of 89.67 yen.
Amari “reversed his earlier comments today and markets added new short yen positions,” said Arne Lohmann Rasmussen, head of FX research at Danske Bank, adding that the Spanish bond auction “certainly helped the euro.”
Strategists said that increasing bets on aggressive policy easing by the Bank of Japan would continue to drag the yen lower before policymakers meet on Jan. 21-22, when it is widely expected to adopt a 2 percent inflation target.
Traders cited strong chart support at 87.77 yen, the low struck on Wednesday, and said that a reported options barrier at 90 yen could act as resistance.

But the yen could rebound if the Bank of Japan fall short of matching market expectations for implementing a very loose monetary policy.
“There is a risk of a disappointment (from the Bank of Japan), but the pattern is that every time there has been a recovery in the yen it has been small and investors are quick to put on new short yen positions,” Nordea FX strategist Niels Christensen said.
“There seems to be a very firm belief this trend (of dollar/yen rising) will continue.”
An improved appetite for risk emerged after a solid bond auction from debt-burdened Spain. Upbeat US data allayed concerns about the world’s largest economy.
Groundbreaking to build new US homes accelerated in December to its fastest pace in over four years while the number of Americans filing new claims for unemployment benefits tumbled to a five-year low last week.
“The euro gained as Spain’s bond auction went smoothly and Portugal said it would announce measures aimed at returning to the bond market this year,” said Nick Bennenbroek, head of currency strategy at Wells Fargo.
Strong demand at a Spanish bond auction buoyed sentiment toward the euro, which last traded at 119.24, up 1.6 percent on the day.
This brought it closer to a 20-month peak of 120.12 yen hit on Monday.
Growing optimism about the euro zone after surprisingly upbeat comments from European Central Bank President Mario Draghi last Thursday.
The euro last traded at $1.3342, up 0.4 percent on the day, but below Monday’s 11-month high of $ 1.3403.
The next important event for financial markets to navigate is the latest batch of Chinese data on Friday.
“So long as the figures confirm a strengthening Chinese economy, we suspect the market’s optimism and the gain in foreign currencies can continue for the time being,” Bennenbroek
The euro also hit a 15-month high against the Swiss franc, of 1.24580 francs, having broken through a reported options barrier at 1.2450 francs. More gains would see it target the peak of 1.2475 francs, hit on Oct. 19, 2011.

Iran sanctions shadow falls on smaller German banks

Updated 27 May 2018

Iran sanctions shadow falls on smaller German banks

  • Some German companies plan to press on with Iran dealings
  • German exports to Iran rose 15.5 percent last year

Germany’s biggest lenders have shied away from business with Iran after past penalties for breaching US sanctions, but smaller banks have leapt on opportunities afforded by the nuclear deal rejected by Donald Trump.

There are just months to go until a November deadline issued by Washington after the US president abandoned a hard-fought agreement that loosened business restrictions on the Islamic Republic in exchange for Tehran giving up its pursuit of nuclear weapons.

But some firms plan to press on in their dealings with Iran despite the looming threat of penalties.

“We will continue to serve our clients,” for now, said Patrizia Melfi, a director at the “international competence center” (KCI) founded by six cooperative savings banks in the small town of Tuttlingen in southwest Germany.

The center, which supports companies operating in sensitive markets like Iran or Sudan, has seen demand “rising sharply in the last few years, from firms listed on the Dax (Germany’s index of blue-chip firms), from all over Germany and from Switzerland,” she added.

German exports to Iran have grown since the nuclear deal was signed in 2015, adding 15.5 percent last year to reach almost €2.6 billion ($3.0 billion) after 22-percent growth in 2016.

Such figures remain vanishingly small compared with Germany’s €111.5 billion in exports to the US — its top customer.

Nevertheless, the KCI will “wait and see what the sanctions look like” before turning away from Iran, Melfi said.

Already, firms dealing with Tehran must take great care not to fall foul of US restrictions.

Transactions are carried out in euros, and the KCI does not deal with businesses that have American citizens or green card resident holders on their boards.

What’s more, products sold to Iran cannot contain more than 10 percent of parts manufactured in the US.

One of the most important inputs for the business is “courage among our managers” given the high risks involved, Melfi said.

Germany’s two biggest banks, Deutsche Bank and Commerzbank, avoid Iran completely after being slapped with harsh fines in 2015 over their dealings there, with Deutsche alone paying $258 million in penalties.

DZ Bank, which operates as a central bank for more than 1,000 local co-op lenders, is withdrawing completely from payment services there, a spokesman told AFP.
That left KCI to seek out the German branch of Iranian state-owned bank Melli in Hamburg.

Even that linkage could break if Iran’s biggest business bank appears on a US list of barred businesses as it has before.

Meanwhile, among Germany’s roughly 390 Sparkasse savings banks, business with the regime is mostly limited to producing documents linked to export contracts.
“We will be looking even more closely at those” in the future, a person familiar with the trade told AFP.

Elsewhere in the German economy, the European-Iranian Trade Bank (EIH) founded in 1971 is another conduit to Tehran.

Also based in Hamburg, it for now remains “fully available to you with our products and services,” the bank assures clients on its website, although “business policy decisions by European banks may result in short term or medium term restrictions on payments.”

Neither does the Bundesbank (German central bank) believe that much has so far changed for business with Iran.

“Only the European Union’s sanctions regime will be decisive,” if and when it is changed, the institution told AFP.

Any payment involving an Iranian party would have to be approved by the Bundesbank if things return to their pre-January 2016 state.

German banking lobby group Kreditwirtschaft has called on Berlin and other EU nations to clarify their stance — and to make sure banks and their clients are “effectively protected against possible American sanctions.”

KCI’s Melfi said time is running out for EU governments to act.

“Many firms just want to stop anything with Iran, since they can’t calculate the risk of staying,” she noted.

On Friday for the first time since the Iran nuclear deal came into force in 2015, China, Russia, France, Britain and Germany gathered in Vienna — at Iran’s request — without the US, to discuss how to save the agreement.