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Yen Weakens Against Majors On Improving Risk-sentiment

The Japanese yen traded lower across the board in early Asian deals Wednesday as a rally in majority of Asia-pacific equities lifted risk-appetite.

However, the rally was stalled on the upside as North Korea launched a long-range missile today despite stern warnings from the United States and the United Nations.

Caution ahead of today's FOMC rate decision also helped limit the risk-rally to some extent. The Fed is expected to announce a new round of Treasury securities purchases to replace its "Operation Twist" program, which expires at the end of the year.

Core machine orders in Japan were up a seasonally adjusted 2.6 percent on month in October, the Cabinet Office said today.

That was shy of forecasts for an increase of 3.0 percent following the 4.3 percent contraction in September.

On a yearly basis, core machine orders collected 1.2 percent versus forecasts for a contraction of 5.0 percent after shedding 7.8 percent in the previous month.

An index measuring tertiary industrial activity in Japan was down a seasonally adjusted 0.1 percent on month in October to 99.2, the Trade Ministry said today. That beat forecasts for a contraction of 0.4 percent following the 0.3 percent increase in September.

Earlier, the risk-sentiment resurfaced in the market after a report from the Center for European Economic Research showed a bigger than expected improvement in German investor confidence.

Positive sentiment was also generated by reports that negotiations between the White House and Republican House Speaker John Boehner, R-Ohio, have progressed steadily in recent days, taking a marked shift and becoming more serious.

However, the optimism was partly offset by comments from Senate Majority Leader Harry Reid, D-Nev., who said it would be "extremely difficult" to reach an agreement before Christmas.

The yen reached 133.15 against the pound, its weakest level since April 2. The next key level for the yen to watch on the downside is at 133.60.

The yen slipped to 6-day lows of 107.47 against the euro and 88.68 against the Swiss franc on Wednesday morning in Asia, compared to yesterday's closing values of 107.33 and 88.60, respectively. On the downside, the Japanese unit may find target levels at 89.00/10 against the Switzerland currency and 108.0 versus the European shared currency.

Against the dollar, the yen reached a 2-day low of 82.64 on Wednesday in Asia. If the yen extends downtrend, likely support level is seen at 82.90/83.0.

The Commerce Department said Tuesday that the U.S. trade deficit widened to $42.2 billion in October from a revised $40.3 billion in September, narrower than the $42.8 billion deficit forecast.

A separate Commerce Department report said wholesale inventories increased by more than expected in October, although wholesale sales showed a notable decrease.

The yen also lost ground against the resource-linked currencies on Wednesday morning in Asia. The yen reached below the key 87.0 level against the Australian dollar for the first time since March 28.

The Japanese currency also fell to a 5-day low of 83.80 against the Canadian dollar and tested yesterday's lows against the NZ dollar, falling as much as 69.34.

On the downside, the yen may find target levels at 87.60 against the aussie, 84.0 versus the loonie and 69.80 against the kiwi.

German CPI, the U.K. jobless claims- both for November, Swiss ZEW survey results for December and the eurozone industrial production for October are due out in the European session.

Import price index for November is the lone data to watch ahead of the much awaited FOMC decision in the New York session.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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