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Japanese Yen at Risk of Deeper Losses on G7 Meeting Outcome

By , Currency Strategist
10 May 2013 06:33 GMT

The Japanese Yen is at risk of deeper losses as G7 officials take an accommodative at a meeting this weekend, boosting broad-based risk appetite.

Talking Points

  • Japanese Yen Continues to Sink in Asia, Deeper Losses Seen Ahead
  • G7 Likely to Take Accommodative Tone on Fiscal, Monetary Policy

The Japanese Yen continued to sink in overnight trade, down as much as 0.6 percent on average against its top counterparts, as risk appetite firmed across most Asian stock exchanges and encouraged capital flows out of the go-to funding currency. The Nikkei led regional bourses higher, a move the newswires attributed back to the Yen to suggest a feedback loop whereby the currency’s weakness fed upon itself. The benchmark USDJPY exchange rate topped the psychologically significant 100.00 mark for the first time in four years earlier in the day after US Initial Jobless Claims unexpectedly fell to the lowest level in over 5 years. This rebooted expectations for a near-term tapering of Federal Reserve stimulus efforts, offering broad-based support to the US Dollar.

The economic calendar is quiet in European session hours and through the end of the trading week. This puts the spotlight on a meeting of G7 finance ministers and central bank governors set to begin today and carry into the weekend. Trades will look for commentary about the so-called “currency war” after central banks in New Zealand and Australia seemingly jumped into the fray this week. The debate between countries promoting fiscal austerity and those in favor of pro-growth policies as the way to correct global imbalances and spur recovery is likewise set to continue.

On balance, officials are unlikely to issue much besides vague admonishments against competitive devaluation given the increasingly widespread drive toward monetary stimulus across the globe. Meanwhile, policymakers’ taste for deficit reduction seems to be on the wane, pointing to the likelihood of a relatively accommodative tone to official rhetoric. Taken together, this seems supportive for risk appetite, which seems to open the door for continued Yen weakness as capital pours into carry trades financed in terms of the perennially low-yielding currency.

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

NZ Card Spending - Retail (MoM) (APR)

0.6%

0.5%

-0.4%

22:45

NZD

NZ Card Spending (MoM) (APR)

1.1%

-

-0.9%

23:50

JPY

Current Account Total (¥) (MAR)

1251.2B

1220.0B

637.4B

23:50

JPY

Adjusted Current Account Total (¥) (MAR)

342.4B

480.8B

-28.1B

23:50

JPY

Current Account Balance (YoY) (MAR)

-4.3%

-5.7%

-47.0%

23:50

JPY

Trade Balance - BOP Basis (¥) (MAR)

-219.9B

-274.0B

-677.0B

23:50

JPY

Bank Lending Banks ex-Trust (APR)

2.1%

-

1.9%

23:50

JPY

Bank Lending incl Trusts (YoY) (APR)

1.7%

-

1.5%

1:30

AUD

RBA Statement on Monetary Policy

-

-

-

4:30

JPY

Bankruptcies (YoY) (APR)

-10.5%

-

-20.0%

5:00

JPY

Eco Watchers Survey: Current (APR)

56.5

57.5

57.3

5:00

JPY

Eco Watchers Survey: Outlook (APR)

57.8

57.5

57.5

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

-

GBP

G7 FinMins, CB Governors Meet in UK

-

-

High

6:00

EUR

German Imports s.a. (MoM) (MAR)

0.8% (A)

-3.9%

Low

6:00

EUR

German Exports s.a. (MoM) (MAR)

0.5% (A)

-1.2%

Low

6:00

EUR

German Trade Balance (€) (MAR)

18.8B (A)

18.0B

Medium

6:00

EUR

German Current Account (€) (MAR)

20.2B (A)

16.0B

Low

8:30

GBP

Trade Balance Non EU (£) (MAR)

-4000M

-4276M

Low

8:30

GBP

Visible Trade Balance (£) (MAR)

-9000M

-9416M

Medium

8:30

GBP

Construction Output (MoM) (MAR)

15.0%

5.5%

Low

8:30

GBP

Construction Output (YoY) (MAR)

-6.6%

-7.0%

Low

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.2977

1.3143

GBPUSD

1.5387

1.5549

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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10 May 2013 06:33 GMT