USDJPY MY FAVORITE

USDJPY MY FAVORITE

By Joseph Plocek

WASHINGTON (MNI) – U.S. April trade data were almost as expected,
consistent with slightly slower GDP growth and showing some effects from
the oil market.

The April trade balance was -$50.1 billion, close to the median
forecast, after a revised -$52.6 billion in March.

Imports fell $4.1 billion as oil-related and other imports fell,
and exports declined $1.5 billion.

Imports had broad declines with computers -$1 billion, aircraft
-$368 million, pharmaceuticals -$1.4 billion, autos -$363 million, and
television-telecommunications -$0.6 billion. In many cases the changes
were offsets to March surges that in turn had responded to a slow
February when the Lunar New Year stoppered imports from Asia.

Oil-related imports fell $0.6 billion because fuel and ‘other’
products declined. But crude prices rose nearly $2 and the number of
barrels of crude advanced as well. World oil price declines in May
should lower these imports anew; apparently the timing of the
Commerce Department’s data collection did not allow an impact in April.

The exports dip reflected -$1 billion in industrial supplies, where
chemicals, steel and plastics fell. There was also a $0.8 billion
decline in aircraft & engines after a March surge.

Changes in services categories were small in April.

Unadjusted, the trade gap by country included: China at -$24.6
billion after -$21.7 billion in March, Japan -$6.3 billion after -$7.15
billion, and OPEC -$11.5 billion after -$9.1 billion.

April imports from South Korea surged to a record $5.5 billion, and
the trade gap with that country was -$1.8 billion after -$0.6 billion in
March. This probably reflects the increased popularity of Korean autos.

China and Japan are planning to trade directly without the USD as the common currency to determine the “cross-rate”.

Instead, the transactions from trading activities will determine the exchange rate. This is a step to promote trading between the two countries.

This could also be an initial sign of the greenback losing its dominance as a reserve currency. As Zerohedge puts it “when one bypasses the dollar, one commits blasphemy to a reserve currency.”

Here is the full report from Agence-France Presse (AFP):

TOKYO — Japan and China are expected to start direct trading of their currencies as early as June as part of efforts to boost bilateral trade and investment, according to reports.

With the planned step, exchange rates between the yen and the yuan will be determined by their transactions, departing from the current “cross rate” system that involves the dollar in setting yen-yuan rates, Kyodo News said on Saturday.

The two governments are eyeing setting up markets in Tokyo and Shanghai, the Yomiuri Shimbun said.

The yen-yuan exchange system would help businesses in the world’s second- and third-largest economies reduce risks associated with exchange rate fluctuations in the dollar and cut transaction costs, Kyodo said.

It will be the first time that China has allowed a major currency except the dollar to directly trade with the yuan, Kyodo said.