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Yen May Extend Gains as Aussie, NZ Dollars Fall in Dour Markets

Yen May Extend Gains as Aussie, NZ Dollars Fall in Dour Markets

What's on this page

Talking Points:

  • Yen gains, Aussie and Kiwi Dollars drop in risk-off APAC trade
  • Rumor that Trump fired NSA McMaster sent markets scrambling
  • FOMC pre-positioning may be the deeper cause of risk aversion

The markets were in a foul mood in Asia Pacific trade, with the sentiment-linked Australian and New Zealand Dollars following regional shares downward while the anti-risk Japanese Yen roared higher. Most of the move came amid reports that President Trump has fired National Security Advisor H.R. McMaster.

Tellingly, the risk-off mood persisted – albeit with more restraint – after the White House denied Mr McMaster’s dismissal. In fact, the start of the move arguably occurred before rumors about his fate hit the wires. That seems to imply that deeper-seated angst has unnerved investors.

Yesterday’s seemingly unprompted recovery in the US Dollar might explain this to some extent. The greenback tellingly rallied alongside front-end Treasury bond yields, suggesting that worries about an acceleration in the Fed rate hike cycle are emerging in the lead-up to next week’s FOMC meeting.

From here, University of Michigan consumer confidence data headlines a dull offering of European and US event risk. A slight downtick in the main sentiment gauge is expected in March after a sharp surge upward in the prior month. This may pass with little notice however as the Fed dominates attention.

Futures tracking the FTSE 100 and S&P 500 equity benchmarks are pointing lower before London and New York come online, hinting the markets’ dour disposition has scope for follow-through. The McMaster rumor’s market-moving potential ought to warn traders to remain vigilant about headline risk however.

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** All times listed in GMT. See the full economic calendar here.


--- Written by Ilya Spivak, Currency Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.