Japanese yen retreats broadly on profit-taking

Market Review - 28/01/2013 22:06       All times in GMT 

Japanese yen retreats broadly on profit-taking

The greenback retreated from its 2-1/2 yearhigh versus the yen on Monday as investors booked their profits after recentrally due to the expectations of further monetary easing in Japan.   

Versus the Japanese yen, although the greenback extended recent upmove to a fresh 2-1/2 year high at 91.26 in New Zealand (Australian market were closed), the pair retreated to 90.57 in European morning due to cross unwinding of yen versus other currencies. Later,despite dollar's recovery to 91.09 in New York morning due to much stronger-than-expected U.S. durable goods data (4.6% m/m versus the forecast of 2.0%), weaker-than-expected U.S. pending home sales (-4.3% versus the expectation of 0.3% and 1.7% in previous reading) pressured the pair to 90.62 and then staged a minor recovery in New York afternoon.   

The single currency traded in choppy fashion on Monday. Price edged lower from New Zealand high at 1.3471 to 1.3425 in European morning due to active cross selling of euro versus yen. Later,although euro recovered to 1.3477 in New York morning due to the upbeat U.S.durable goods data, price swiftly retreated to 1.3432 as the IMF said 'Hungary's economy expected to stagnate in 2013; Hungary's gross financing needs "very large".' and then traded inside this range for the rest of the day.    

The British pound came under selling pressure at New Zealand open and fell to 1.5757 partly due to weekend news of UK Deputy Prime Minister Nick Clegg expressing concerns over the referendum on quitting the EU. Despite cable's brief recovery to 1.5786 ahead of Tokyo open, the pair dropped in tandem with euro to 1.5716 in European morning. Active cross selling of sterling versus euro sent the pair further lower to 5-1/2 month low at 1.5674 in New York afternoon before stabilising.    

In other news, Heizo Takenaka, a key economic advisor to Japanese PM Shinzo Abe said on Saturday that yen still has room to weaken further and many see 95 yen to a dollar as its desirable rate, while dismissing growing charges that Tokyo was easing monetary policy to guide the currency lower. Takenaka, who has long advised Prime Minister Abe on economic issues, and whose name has been floated as a possible candidate for the next head of the BoJ, said the yen's recent fall was a result of a correction from an excessive strength. He said "This correction has just started, it's not fair to say the yen has depreciated too much."   

Data to be released on Tuesday:   

New Zealand Trade balance, Exports,Imports, Australia NAB business confidence, NAB business conditions, GermanyGfk consumer confidence, France consumer confidence, U.S. Redbook retail sales,SnP/CS home price, Consumer confidence.