JPY Displays Increases Across the Board

By: Hillel Fuld
The JPY displayed an increase across all currencies on Wednesday due to investors trimming stretched risk positions in higher-yielding currencies. The stock market also fell following U.S. Data that was weaker than expected.

The AUD hit a two week low as investors limited their expectations for an aggressive interest rate increase next week. This comes as a response to a rise in consumer price inflation that was not as steep as expected. Consumer prices rose 1.3 percent over the year and 1.0 percent in the third quarter.

Chief economist at Commonwealth Bank, Michael Blythe, stated that the reading was a drop higher than expected and was consistent with the opinion that the central bank would raise rates at its Nov. 3 board meeting. "I would say the outcome is probably more in line with a 25 basis point move than a 50 point move," Blythe said.

The AUD increased as high as $0.9208 as a result of the data but then fell 0.7 percent on the day to $0.9106. The dollar index .DXY, which is a display of its performance against six other majors, eased 0.1 percent to 76.056 after reaching a two-week high of 76.328 yesterday.

The EUR stabilized at $1.4834, up 0.2 percent from late U.S. trade, but not making much progress after falling to a two-week low of $1.4769 the previous day. That came as investors trimmed long positions following disappointing U.S. consumer confidence numbers.

The EUR hit a 14-month high of $1.5064 on Monday. The JPY rose following traders claiming that the market was currently more sensitive to Forex news, which lead to a reduction in risk positions. "The currency market is opting to focus on the negative side of the economy, after U.S. consumer confidence, especially persistent trouble in the labour market, reinforced investors' worries about the U.S. economic recovery," said Jun Kato, a senior chief analyst at Shinkin Central Bank Research Institute.

"Losses in stocks and commodity prices such as gold led investors to further cut long positions in yen crosses," he said. Traders stated that there was a lot of profit-taking in USDJPY by short-term players abroad, as well as USDJPY and EURJPY selling by Japanese players. These sellers were most likely exporters in particular since Wednesday is the final day for trades to be closed by the end of the month.

Another trader claimed that the JPY cross losses were partly a result of the AUD's losses against the USD as well as declines on the stock market. The EUR fell 0.2 percent to 135.55 vs the JPY, and the Yen pulled back from a more than two-month high of 138.49 that it hit on EBS trading platform Monday.

The USD fell 0.5 percent to 91.33 JPY, rebounding from a one-month high of 92.33 JPY hit on EBS the previous day. The NZD fell 0.5 percent to $0.7404 prior to the Reserve Bank of New Zealand's rate review on Thursday. The latest Reuters poll emphasizes that no change is expected in the 2.5 percent cash rate, with economists predicting that the central bank will start making hikes as early as March 2010.