Currencies
Once again yen flows dominated the foreign exchange markets. The currency sank to a three year low against the dollar after a report said Japanese companies are failing at the fastest pace since 1984, fueling concerns that the recession will intensify. The soaring number of bankruptcies heightened concerns that foreign investors would move their money out of Japan, especially after some Japanese officials have suggested they want a weaker currency to boost exports. The bankruptcy figures culminated a week of increasingly gloomy economic data. (See indicator scoreboard below.) Japan's currency sank to 127.93 per dollar, before recovering slightly to end the week at 127.33. The yen also fell against the euro and British pound sterling to its weakest levels in more than two years.

The euro rose above 90 U.S. cents on Friday for the first time since November 12, largely because of euro-yen cross flows as there was little economic information to give the euro a boost. With many market participants already finished for the year and others opting to wait until the New Year to begin actively trading, liquidity could become a problem. Currency pairs could move further and faster than they would normally just because of thin markets.

Next year's wage negotiations will be important for the European Central Bank's monetary policy. Significant wage demands from Germany's two largest unions and the effect this will have on other industry sectors seem to contradict the recent optimism of the ECB that wage hikes will continue to be moderate. But analysts said the high wage demands by Verdi and IG Metal are bargaining tools, with actual results expected to be much lower.

Introduction   •   Global Stock Market Indexes   •   Recap of Global Markets   •   Currencies   •  Indicator Scoreboard

The Bottom Line   •   Looking Ahead