Yen Sinks as Markets Position for Dovish FOMC Outcome

The Japanese Yen tumbled as traders speculated the Federal Reserve will prove to be in no hurry to reduce stimulus efforts at this week’s policy meeting.

Talking Points

• Japanese Yen Sinks, Aussie and NZ Dollars Soar on Pre-FOMC Positioning
• S&P 500 Futures Hint Risk-On Mood Likely to Carry Forward into US Trade
• G8 Summit Begins in N. Ireland; Major Policy Innovations Not Expected

The Australian and New Zealand Dollars outperformed in overnight trade while the Japanese Yen as risk appetite swelled to start the trading week. The MSCI Asia Pacific regional benchmark equity index soared 1.3 percent in what appeared to be a response to last week’s IMF downgrade of its US economic growth forecast. Traders appeared to treat the news as a prelude to this week’s FOMC policy meeting, betting still-sluggish performance will see the Federal Reserve will pour cold water on the recent flare-up in stimulus cutback speculation.

The economic calendar is relatively quiet in European hours, hinting risk appetite trends are likely to remain the main driver of price action. S&P 500 index futures are pointing sharply higher to hint the risk-on mood is due to carry forward ahead of the opening bell on Wall Street. G8 leaders begin a two-day summit in Northern Ireland today. Issues including tax evasion, global trade expansion and Japan’s latest economic policies are tipped to be on the docket. Significant policy innovations are not expected but markets will nonetheless monitor chatter from the sit-down for any relevant headlines.

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--- 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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