FX Overnight Briefing

Financial News - US & Far East

* U.S stocks fell
* Gjedrem warned about higher rates
* Stocks hit on U.S worries
* BOJ unchanged

Today's Main Events

* NOK: Trade balance
* EUR: ECB's Quaden and Liikanen speaks
* USD: TICS

American Timezone:

U.S. stocks fell

U.S. stocks fell for the first time this week after Federal Reserve Chairman Ben S. Bernanke warned that credit losses will restrain growth and analysts said Intel Corp. may be hurt by slower computer sales. Merrill Lynch & Co. and Goldman Sachs Group Inc. led brokerages lower after Lehman Brothers Holdings Inc. also predicted more writedowns from creditmarket losses. Intel, the world's largest chipmaker, slumped the most in eight days. The declines overshadowed a rally in energy shares sparked by faster than-expected Japanese economic growth that sent Tokyo's Nikkei 225 Index to its biggest gain since 2002.

USD fell to one week low

USD fell to a one-week low against EUR after Federal Reserve Chairman Ben S. Bernanke signaled the bank may cut interest rates further amid concern that the economy is headed for a recession.

Oil higher

Crude oil rose to a one-month high as economic indicators from Asia and the U.S. allayed concern that a global recession is imminent.

Gjedrem warned about higher rates

Turmoil in international markets has clouded prospects for Norway's strong economy where inflation is rising and big wage demands could force interest rates to be set high, the central bank chief said on Thursday. Employment in Norway has grown rapidly for the past two years, at the fastest pace in the past few decades, he said. Wage growth hit a five-year high last month.

'Should the recent sharp rise in employment result in unexpectedly high wage growth, the interest rate will again have to be set at a high level to keep inflation subdued,' he said. 'We may again experience a high interest rate level in Norway relative to other countries over a longer period.'

'This could translate into a pronounced setback in production and employment,' Gjedrem said.

Far East Timezone:

Stocks hit on U.S worries

Asian stocks fell on Friday after the Federal Reserve chairman said risks to U.S. economic growth had picked up, while global credit concerns resurfaced after a steep ratings downgrade of a U.S. bond insurer. Shares in exporters and financials dropped, derailing a rally in Asian markets the previous day that saw Japanese stocks post their biggest daily gain in six years on optimism about the global economy.

The dollar stayed weak on the growing concerns about the outlook for the world's largest economy, a worry for exporters as stronger Asian currencies hit returns earned overseas.

Australian shares lost 1.4 %, and stocks in South Korea, Taiwan and Singapore were off less than 1 %.

Oil fell in Far East

U.S. crude oil futures fell slightly on Friday after having surged more than 2 % to above USD 95 a barrel the previous day, as concerns over supply disruptions from Venezuela and Mexico began to ease.

Front-month U.S. crude for March delivery was down 34 cents, or 0.4 %, at USD 95.12 a barrel on the Globex electronic trading platform. On Thursday, it settled up USD 2.19, or 2.4 %, at USD 95.46 a barrel, trading from USD 93.25 to USD 95.60, the highest since the USD 96.24 peak on January 10th.

BOJ unchanged

The Bank of Japan left its policy rate target unchanged at 0.5 % on Friday as expected, with turbulence in financial markets and fears about a U.S. recession heightening concerns over the economic outlook.

The decision by the nine-member board was unanimous, which came as little surprise because hawkish board member Atsushi Mizuno dropped his call for a rate rise in December.

Jyske Markets - FX Research

Posted in: Forex