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Daily Report: Yen Rally Continues After Dovish FOMC Minutes

Published 04/07/2016, 01:10 AM
Updated 03/09/2019, 08:30 AM
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Yen continues to rise against other major currencies partly helped by comments from prime minister Shinzo Abe and the more dovish than expected FOMC minutes. USD/JPY took out 110 handle this week and hit the lowest level since 2014. GBP/JPY also broke recent low of 154.70 and hit the lowest since 2013. EUR/JPY follows and breaks near term support of 124.66 and should be heading back to recent low of 122.06. Yen was lifted by a couple of factors including slow Fed hike path, easing in Eurozone, Brexit fear and concern of return of risk aversion. Abe was reported saying that countries shouldn't avoid to weaken their currency with "arbitrary intervention", suggesting that Japan would not intervene in near term. And, jawboning would probably be what Japan chooses to do. So far only unnamed Ministry of Finance official was quoted saying that Yen's move is "one-sided" and MoF would take steps if necessary.

The minutes of March 15-16 FOMC meeting showed that "participants generally saw global economic and financial developments as continuing to pose risks." And, "many participants indicated that the heightened global risks and the asymmetric ability of monetary policy to respond to them warranted caution." Meanwhile, a rate hike in April would "signal a sense of urgency" and several policy makers thought that was inappropriate. Instead, they believed that "a cautious approach to raising rates would be prudent". Overall, the minutes solidify the view that Fed will stand pat this month.

Elsewhere, Swiss will release foreign currency reserves today. ECB will release monetary policy meeting accounts. Canada will release building permits. US will release jobless claims as usual on Thursday.

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