With the underlying currency appreciating as much as 6 percent against higher yielding currencies like the US dollar, investors are beginning to see weakness in the their foreign holdings purporting a return to cash. However, the extreme report reading has also given investors reason to boost their risk appetite once again in the session, helping yen crosses to push higher in the day. Incidentally, the currently positive rally will remain dependant on tomorrow’s assessment of the world’s second largest economy and its industrial productivity. Although policy makers have cited strong manufacturing sector activity and underlying growth, market participants will look to confirm the notion. Unfortunately, for yen bulls, the figure is expected to remain widely consistent with the month’s preliminary reading, with a decline likely to boost yen weakness.
Written by Richard Lee, Currency Strategist and Terri Belkas, Currency Analyst of DailyFX.com