Chart of the day --- Tom (slow)
>> cal key has―alcoa has reopened for trading. shares popping 6% following the release of its better-than-expected quarterly earnings. the aluminum maker earned 70 cents a share in the first quarter. analysts polled by thomson financial had a median forecast of 21 cents -- 51 cents a share. the analysts point to rising aluminum prices for alcoa’s strong quarter. we want to go ahead and get cements from―comments from dick parsons, on our air earlier today. ok, apparently we’re having technical difficulties getting that dick parsons sound for you. we want to bring you to today’s “chart of the day.” the subject, yen versus euro. goldman sachs’ economists calling for a stronger yen against a weaker euro, looking for rate hikes from the bank of japan to be a signal of a tilt to asia. time for a regular look at the “chart of the day” with our editor-at-large tom keene. hope you had a nice weekend.
>> this is an interesting story, about two currencies and usually we go dollar, yen, euro, dollar, dollar, dollar, dollar. if you don’t look at the dollar and end up in the cross rates, lesser obscure pairs within the foreign exchange market . theio euro-yen or comparing the number of yen per euro is the biggest cross three.
>> why is it considered obscure? they’re major currencies?
>> we are dollar on the brain because we’re dollar centric. but the yen and euro have the full focus was economists. you can see the trend line over 30 years, the red lines going down, meaning stronger yen. what you have is a 30-year pressure towards stronger japan economy, weaker european economy, which is no surprise. the japanese economy has done really, really well. here we come down to the bottom and up, up, up we go to the trading zone. goldman sachs calls it―saying they look now to step in and bet on japan. by that, they mean, the tilt, the economic pressures as well as the trading pressures is towards believing in stronger yen and weaker euro. now’s the time --
>> why, why, why? rising interest rates in japan?
>> that’s the beginning of rising interest rates in japan but all the at the same time you may see rising interest rates in europe. so the key word is relate. relatively rising rates in japan is one of the reasons but the other reason is the continued trade pressure. how much money can asia bring in that they have to turn around and invest in europe and particularly in the u.s. maybe we’ve reached a critical point in the coming months and quarters where they finally have to do something besides just bring their money back. the way you do that is to let your currency rise. that would be yen appreciation, renminbi appreciation, as well.
>> does this have anything to do with repositioning actual positions? a lot of traders bet in favor of the euro or yen before?
>> that’s one ofrt of it, a long-term bet over recent quarters and months into euro. they come in different shapes and sizes, like going to the bread basket in the supermarket, many different types. what the economist with goldman sachs is saying is the best is on europe and they look for the bet to reverse, one of the catalysts being rising interest rates by japan.
>> what is the blue line?
>> we’ve come so far so fast from here to here, they’re looking for this little bit of a turnaround to get back to the normal part of the tradeable range. and it’s an interesting bet but what’s much more interesting is the structural sense of how will asia help in the global imbanses balances and one of them is stronger japanese yen, stronger chinese yuan, stronger singapore dollar, et cetera.
>> do you have an idea what the spread will be between yen and euro, how much stronger yen could be?
>> the bloomberg survey is widespread. the answer is, moving in that direction, the median is close to the goldman sachs target of 137 yen per euro.
>> appreciate it so much, bloomberg news editor-at-large, tom keene.
>> sure.
>> things were fairly calm in the u.s. stock market compared to the fireworks in turkey. our “world’s biggest mover” segment, plus world and national headlines on the way.
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Listen World and National News --- Mark (medium)
>> i’m mark crumpton with a world news update. italian prime minister silvio berlusconi and former european commission president romano prodi are locked in an election fight too close to call. with more than 57% of the vote for the chamber counted, prodi’s coalition led berlusconi’s party 51.3% to 49.2%. in the senate, with 83% of the vote counted, bell’s alliance led―berlusconi’s alliance led. meantime, projections for the state-owned television network, gave berlusconi a .1% lead in the chamber of deputies, giving him 340 seats in the 630-seat house. the projections indicate that berlusconi’s coalition would also win a narrow majority in the senate.
