Investing.com - The yen gained in Asia on Wednesday, reversing earlier direction with eyes on monetary policy and the Aussie eased after a downbeat consumer survey and with China trade data possible later in the day.
USD/JPY changed hands at 104.63, down 0.06%, while AUD/USD traded at 0.7611, down 0.16%. GBP/USD was up 0.31% to 1.3287 with Theresa May set to take over as Britain's newest prime minister.
In Australia the Westpac consumer sentiment index for July fell 3.0% compared with the last reading down 1.0%.
"The Reserve Bank Board next meets on August 2. We expect that it will decide to further reduce the overnight cash rate to 1.5%," said Westpac's chief economist Bill Evans.
"With the AUD lifting above USD0.76 and the inflation target at risk it seems a sensible policy option to cut rates further. However, we are mindful that despite cutting rates the Board did not lower its growth forecasts indicating that the motivation behind the May decision was entirely around the need to credibly achieve the inflation target over the forecast period. Rigid adherence to that policy in future might be questioned particularly, as hinted at in this survey, if the rate cuts spill over into excessive exuberance in asset markets. Hence we expect that this cut will, most likely, be the last in the current easing cycle", Evans said.
China is expected to report trade data with a surplus balance of $46.64 billion seen, with imports down 4.1% in June year-on-year and exports down 5.0%.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was last quoted down 0.03% to 96.53.
Overnight, USD/JPY surged on Tuesday completing a massive two-day rally, upon confirmation that former Federal Reserve chair Ben Bernanke met with Japan prime minister Shinzo Abe to discuss ways to help one of the world's top economies avoid deflation.
The currency pair soared in Tuesday's session, reaching two-week highs of 104.98, before inching down to 104.75 at the close of U.S. afternoon trading, up 1.89% on the day. Since Abe's Liberal Democratic Party (LDP) triumphed in a landslide upper house election over the weekend, the U.S. Dollar has soared more than 4% against the Yen, nearly returning to pre-Brexit levels from late last month. The yen is still up considerably against its American counterpart over the last month, as investors have piled into the safe-haven currency to hedge against extreme volatility in global financial markets.
Foreign exchange traders remained focus on economic developments in Tokyo on Tuesday, where Bernanke met with Abe for approximately 30 minutes at the Japanese prime minister's office, according to multiple reports. The discussions followed lengthy speculation that the former head of the U.S. central bank had plans to craft a strategy for bringing "helicopter money," to Japan in a last-ditched effort to help stave off deflation nationwide. The concept of helicopter involves large scale printing of money by a central bank that is distributed to the public as a way for helping stimulate the economy. Koichi Hamada, one of Abe's top advisors, told the Wall Street Journal that prospects for including helicopter money as part of a large-scale easing initiative may have been discussed at the meeting.
Bernanke left the meeting without speaking to reporters.
"Mr. Bernanke said Japan should boost nominal gross domestic product with fiscal policy and, in coordination with that use monetary policy since the BoJ has various means available to ease policy," a Japan government spokesman told reporters outside the meeting.
Following the LDP's resounding victory, Abe outlined a ¥10 Trillion ($98 billion) stimulus measure aimed at jumpstarting the economy, including a proposal to fast-track construction on a series of high-speed trains throughout the nation. At the same time, Abe's cabinet projected lowered its full year consumer inflation outlook to 0.4% for the fiscal year ending next year, down from previous estimates of 1.2%, Japanese government sources told Reuters. The Japanese prime ministers appears ready to utilize all "three arrows" of his comprehensive Abenomics' economic plan to help defeat inflation. The plan consists mainly of easing, stimulus and structural reforms.
Elsewhere, Federal Reserve Bank of St. Louis president James Bullard reiterated his position that current economic conditions deem it appropriate for the U.S. central bank to raise short-term rates only once over the next two years. While delivering a speech in St. Louis, Bullard noted that a flattening yield curve from plummeting long-term U.S. Treasury yields does not necessarily imply signals of an imminent recession. In the wake of last month's Brexit decision, government bond yields worldwide, including those on U.S. 10-Year and U.S. 30-Year Treasuries have plunged to all-time record lows.