Yen Traders Wary Ahead of Key Election

Currency analysts believe that there is a strong probability that the USD/JPY pair will once again touch last week’s peak of 101.53 Yen given the Yen’s recent underperformance and especially ahead of a key election in Japan’s Upper Parliament this weekend. Many believe that the outcome of the election should reaffirm Shinzo Abe’s stance toward structural reforms that will sufficiently weaken the Yen in order to restore the Japanese economy to good health.

As reported at 11:15 a.m. (JST) in Tokyo, the USD/JPY pair was trading higher at 100.55 Yen, the momentum from the 0.8% gain on Thursday still apparent. The EUR/JPY pair traded at a 7-week peak of 131.89 Yen, with resistance seen at the 132.60-132.86 levels while the GBP/JPY pair tested a key barrier level at 153.00 Yen. Expectations are very high for a solid LDP victory and analysts caution that anything less could mean a Yen recovery early in Monday’s trading session.

The U.S. Dollar was broadly firmer as investors considered that Ben Bernanke’s testimony did not change the outlook for the cessation of quantitative easing while stronger than expected economic data supported that conviction. The news that Moody’s, the credit rating agency, had also reaffirmed the United States’ AAA credit rating and offered an improved outlook for U.S. sovereign debt moving from negative to stable helped to provide support for the greenback as well. The U.S. Dollar Index was trading at 82.799 .DXY, while the EUR/USD pair was trading at $1.3106.