Yen Falls as Bank of Japan Expresses Concerns about Currency Rise
For a second consecutive day, the Japanese Yen is under
pressure after a Bank of Japan official expressed his concern about the rise in
the currency.Despite official denials,
the BoJ seems ready to intervene if the Yen continues to appreciate too
much.The Bank of Japan and the Japanese
government want to avoid currency volatility.They both feel that that economic growth cannot be sustained if the Yen
is fluctuating too much.
Yesterday, following an emergency meeting, the Bank of Japan
voted to provide three-months of stimulus in order to avoid deflation.Overnight, Bank of Japan policymaker
Shirakawa said he was open to adopting more measures to support the economy.
This was a safe way of saying more stimulus was likely.Traders are reacting by selling the Yen.
While the fear of deflation is the main issue, critics
believe the three-month stimulus announced yesterday will only provide
short-term relief to the economy.This
sets the stage for future appreciation in the Yen once the stimulus wears off,
and a likely intervention in early 2010.This issue is likely to be addressed when the BoJ holds its regular
meeting on December 17th.
Traders will be focusing on the U.S. ADP Report this
morning.The report is expected to show
that the pace of jobs loss in the U.S. is slowing, bringing the
economy closer to sustaining its current recovery.The early estimate is for a job loss of
150,000 versus a loss of 203,000 in October.A stronger than expected report will lead to an increase in risk
appetite which should pressure the Dollar.
This morning, the basket of currencies is trading steady to
better.Last weekâ€™s low at 74.27 is
still holding.A break through this
level is likely to trigger a further decline to the April 2008 bottom at
The EUR USD is trading flat.Traders are being a little hesitant about getting aggressively long at
$1.51 ahead of the ADP Report.Support
is coming from the news that the Dubai
credit crisis is stabilizing and remains a local rather than global issue.
Tomorrowâ€™s European Central Bank meeting is also helping to limit
speculation.The ECB is expected to
leave interest rates unchanged while providing an outline of details on how it
will wind down its stimulus packages.
The GBP USD overtook a key retracement level at 1.6646 last
night.This price is now support along
with 1.6575.A failure to hold these
levels will be a sign that a secondary top is forming.The easing of concerns in Dubai
is helping to boost demand for the British Pound along with a U.K. construction report which
showed that the pace of contraction in this industry has slowed.
The USD CHF is trading in a tight and narrow range overnight
with a slight bias to the downside.The
Swiss Franc is trading at close to par with the Dollar on the news that the
country emerged from its recession.A
rapid rise in the Swiss Franc or excessive volatility against the Euro is
likely to attract fresh selling by the Swiss National Bank.This action may help the Dollar to rebound.
The USD CAD is trading a little better overnight on light
volume ahead of todayâ€™s U.S.
employment report.This currency pair is
currently straddling .618 support at 1.0459.Yesterday, the Canadian Dollar rose on the news that Russia was
adding the currency to its Forex reserves.This action coupled with a strong rise in equities and a firm crude oil
market helped the USD CAD break through recent bottoms at 1.0449 and 1.0416.
Stronger demand for higher yielding currencies is helping to
boost the AUD USD and NZD USD.Yesterday
the Reserve Bank of Australia
announced a 25 basis point rate hike to 3.75 percent.Gains were limited, however, when the RBA
hinted in its statement that inflation would remain in check. Traders interpreted this as a sign that the
pace of interest rate hikes would slow.Overnight, the Aussie is trading higher, but remains slightly below the
last main top at .9322. Falling back below .9230 will be a sign of weakness.
The NZD USD is trading higher but the pace of the rally is
slowing as the market has reached a retracement zone at .7272 to .7332.Gann angle resistance at .7283 is providing
additional resistance.Upside momentum
could take this market to .7332 - .7335 later today.
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