Growth Currencies Reverse Course

During the Asian trading session the Euro moved lower against the U.S. Dollar, coming down off a 2-week peak set yesterday after an improvement in risk on sentiment after markets learned of the U.S. avoidance of the fiscal cliff. As reported at 1:25 p.m. (JST) in Tokyo, the EUR/USD pair was trading at $1.3139, down from $1.3300 established during the trading session yesterday.

The USD/JPY pair also reversed course and edged higher during the session as initial pressure on the pair waned. On the EBS trading platform the pair had touched on a session high of 83.36 Japanese Yen before dipping to 87.21 Yen, a loss of 0.1%. The Yen appreciated on the crosses as well, with the EUR/JPY pair trading lower at 114.60 Yen, a loss of 0.5% and off the 18-month peak of 115.995 Yen which set on the EBS yesterday. The safe haven Japanese Yen had lost much of its appeal earlier this week as risk appetite was whetted, but most analysts concur that the USD/JPY pair at least was in overbought territory and that the pair still should see a rise in the coming months given the Bank of Japan’s aggressive easing inclinations.

Traders expect that with the new policy stance of the Japanese central bank any potential pull backs in the crosses will be done at a rapid pace, especially given the U.S. Dollar’s rapid rise over the past several weeks. In the last year, the U.S. Dollar surged some 12.8% against the Japanese currency, logging the largest annual percentile gain in seven years, with more than 10% of that occurring over the past two months.