Yen Aims Higher as Risk Appetite Sours Across Financial Markets

2017-12-06 06:30:00 Ilya Spivak

Talking Points:

Japanese Yen may extend gains as stock futures hint at risk aversion
Australian Dollar down after third-quarter GDP figures disappoint
New Zealand Dollar attracts demand as Fed rate hike outlook cools

The Japanese Yen traded broadly higher as Asia Pacific bourses followed Wall Street downward, offering a lift to the perennially anti-risk currency. The Australian Dollar fell following disappointing GDP data. The New Zealand Dollar rose however, tracking front-end Treasury bond futures higher to hint that a cooler Fed rate hike outlook may have burnished the currency’s appeal as a yield-seeking alternative.

Another quiet day on the European data docket seems likely to put sentiment trends back in the spotlight. Futures tracking the FTSE 100 and S&P 500 equity benchmarks are pointing convincingly lower before London and New York come online, spelling trouble for risk-geared commodity bloc currencies and hinting at further gains for the Yen.

With that in mind, risk appetite has been fickle over the past two days. A positive lead in stock index futures that argued for risk-on dynamics proved to be misleading in back-to-back sessions, with investors’ mood souring mid-session. It is unclear whether the same pattern is likely to hold when preliminary indications point to a risk-off bias, but traders would be wise to tread carefully.

As ever, politics remain a wildcard. UK Brexit Secretary David Davis is due to address a parliamentary committee and Prime Minister Theresa May faces question time in the House of Commons. Both will surely have to opine on the almost-there EU/UK accord that fell apart early this week. Headlines out of Washington DC also bear watching as the Mueller investigation closes in on President Donald Trump’s inner circle.

Need help building confidence in your trading strategy? See our guide !

Asia Session