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Forex Analysis: Dollar Index Extends Advance on Yen Weakness

By Renee Mu
24 January 2013 21:34 GMT

Column1

OPEN

HIGH

LOW

LAST PRICE

CHANGE(%)

USDOLLAR Index

10105.21

10160.45

10102.79

10152.59

0.5469

EURUSD Curncy

1.3318

1.3393

1.3286

1.3374

0.4205

GBPUSD Curncy

1.5845

1.5851

1.5757

1.579

-0.3471

USDJPY Curncy

88.61

90.14

88.42

89.96

1.5235

AUDUSD Curncy

1.0555

1.0555

1.0451

1.046

-0.9000

Prices were taken at 19:10 GMT

The USDJPY pair contributed the most to the Dollar Index surge, rallying 1.52 percent on the session. Dovish commentary from Japanese Government officials put more pressure on the Yen. Early this morning, Japan Prime Minister Abe said that he wanted the Bank of Japan to achieve the inflation target of 2 percent as soon as possible with bold easing if necessary. Japanese Finance Minister Taro later said that government spending must be cut and new bond issuances in 2013 should be kept below tax revenue.

Domestic issues were not the only drivers for JPY weakness. Tensions surrounding territorial disputes with China worsened as a Chinese fishing boat was detained by Japanese authorities around the disputed Diaoyu/Senkaku islands. Further escalations in tensions could lead to protests in China as they had last year, which could hurt consumption of Japanese goods and the economy itself.

Strong Chinese HSBC Manufacturing PMI data likewise surprised markets, coming in stronger than expected and pushing the Japanese Yen lower across the board. The USDJPY will likely remain the most important driver of USDOLLAR moves as BOJ December Minutes and National CPI data will be released. Also, a meeting between Chinese President Xi Jinping and the leader of one Japanese ruling party tomorrow may affect the relationship between Asia’s two largest economies.

The British Pound fell further against the US Dollar, hitting 6-month lows as UK Prime Minister Cameron continued to defend the referendum on Britain leaving the European Union at the Davos summit. He emphasized that the UK was not turning its back on Europe, but he hoped to make the UK an engine for European growth. Tomorrow, the 4Q GDP in Britain will be the top news for the Sterling, and analyst estimates point to weaker growth figures than seen in 3Q.

Most majors in today’s session fell against the greenback except for the euro. Early in the session, EURUSD declined on a lower-than-expected French PMI report. Yet, the euro quickly retraced as the German PMI Manufacturing and Service report beat median forecasts by analysts polled by Bloomberg News. Tomorrow, German IFO data will be the top news for the EURUSD.

Forex Economic Calendar

Date

Time

Currency

Event

Importance

Forecast

Previous

Thu Jan 24

23:30

Forex_Analysis_Dollar_Index_Extends_Advance_on_Yen_Weakness_body_jpy.png, Forex Analysis: Dollar Index Extends Advance on Yen Weakness

JPY National Consumer Price Index (YoY) (DEC)

High

-0.2%

-0.2%

23:50

Forex_Analysis_Dollar_Index_Extends_Advance_on_Yen_Weakness_body_jpy_1.png, Forex Analysis: Dollar Index Extends Advance on Yen Weakness

JPY BoJ Minutes of December Meeting

High

Fri Jan 25

09:30

Forex_Analysis_Dollar_Index_Extends_Advance_on_Yen_Weakness_body_gbp.png, Forex Analysis: Dollar Index Extends Advance on Yen Weakness

GBP Gross Domestic Product (QoQ) (4Q A)

High

-0.1%

0.9%

09:30

Forex_Analysis_Dollar_Index_Extends_Advance_on_Yen_Weakness_body_gbp_1.png, Forex Analysis: Dollar Index Extends Advance on Yen Weakness

GBP Gross Domestic Product (YoY) (4Q A)

High

0.2%

0.0%

13:30

Forex_Analysis_Dollar_Index_Extends_Advance_on_Yen_Weakness_body_cad.png, Forex Analysis: Dollar Index Extends Advance on Yen Weakness

CAD Bank Canada Consumer Price Index Core (YoY) (DEC)

High

1.4%

1.2%

13:30

Forex_Analysis_Dollar_Index_Extends_Advance_on_Yen_Weakness_body_cad_1.png, Forex Analysis: Dollar Index Extends Advance on Yen Weakness

CAD Consumer Price Index (YoY) (DEC)

High

1.2%

0.8%

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24 January 2013 21:34 GMT