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Yen Strengthens Against Majors

The yen gained ground in a relatively quiet Asian session on Wednesday as the market adopts a risk-aversion tone after the Federal Reserve Chairman Ben Bernanke gave no hints on stimulus yesterday.

In prepared remarks to the Senate Banking Committee, Bernanke reiterated that the central bank is prepared to take further action if the economy continues to struggle, although his remarks did not seem to indicate that further stimulus was imminent.

Meanwhile, members of the Bank of Japan's Monetary Policy Board felt that the Japanese economy is showing signs of recovery as domestic demand remains firm, minutes from the bank's meeting on June 14 and 15 revealed today.

However, the members also felt that the bank should remain ready to take action if risks materialize from Europe. They also agreed that the Japanese economy continues to face the challenge of overcoming deflation.

At the meeting, the policy board unanimously decided to hold the key uncollateralized overnight call rate at around 0 to 0.1 percent. The size of the asset purchase fund and credit facility was also left unchanged at JPY 40 trillion and JPY 30 trillion, respectively.

The yen advanced above the 79.0 level against the US dollar, hitting as high as 73.95 before holding steady around 1:30 am ET. The next upside target for the yen is seen around the 78.80 level.

The Japanese currency also rose as high as 96.90 against the euro and 80.69 against the Swiss franc before leveling off around 1:45 am ET. If the yen edges up further, it may find target levels at 80.30 against the franc and 96.40 against the euro.

Against the pound, the yen jumped to 123.50 around 1:45 am ET. The yen is presently worth 123.60 against the pound with 123.0 seen as the next likely upside target level.

The yen also outperformed against the resource-linked currencies on Wednesday in Asian trading. The yen advanced to session's highs of 62.77 against the NZ dollar, 77.97 against the Canadian dollar and 81.28 against the Australian dollar.

A leading indicator for Australia's economic activity suggested that the economic growth may improve in the second half of this year, though the index currently remained below its long-term trend.

The Westpac-Melbourne Institute Leading Index was at 1.6 percent in May, below its long term trend of 2.6 percent. The leading index shows the likely pace of economic activity three to nine months into the future.

Looking ahead, Bank of England's minutes of its July 4 and 5 meeting, UK jobless claims for June, Swiss ZEW survey results for July and the eurozone construction output for May are expected in the European session.

The U.S. housing starts and building permits for June, the Federal Reserve's Beige book Economic survey results and the Bank of Canada monetary policy report are set to publish in the North American session.

The Federal Reserve Chairman will continue delivering his semi-annual testimony before the house at 10:00 am ET.

by RTTNews Staff Writer

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