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The YEN declines versus the Dollar and the Euro on Tankan Report

Wed, Jul 1 2009, 11:45 GMT
by Benny Menashe

Finotec Group Inc.

The JPY dipped earlier after the Bank of Japan’s quarterly Tankan survey showed sentiment among the largest manufacturers rose less than economists expected at -48 from an expected -58. “Japan’s economic situation is worse than expected,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo. “Investors may try to err on the side of being cautious. That will lead to stock declines and prompt demand for the yen as a safe haven.” The dollar climbed against the yen on speculation a report today will show manufacturing in the U.S. shrank in June at slower pace. The Dollar Index, that tracks the greenback against the currencies of six major U.S. trading partners was little changed at 80.183. The USD/JPY is currently trading at 96.85 as of 8:56am, London time.

The Euro is slowly inching early today, supported by high European shares, but gains are limited as trader’s awaited data on European manufacturing due later today. A weak reading of U.S. consumer confidence on Tuesday held up risk appetite and helped keep the euro away from a high touched against the dollar yesterday. Investors await for an announcement by the European Central Bank on Thursday, as well as U.S. nonfarm payrolls which will be looked upon to gauge whether the decline in the U.S. jobs market is starting to stabilize. "It is becoming clear that risk appetite is starting to lack consistency and any catalyst could trigger a broad correction amid weak summer liquidity conditions," analysts at UBS said in a research note. "With the ECB and payrolls out tomorrow, the market is choosing to tread cautiously and we expect this to remain the dominant theme today." The EUR/USD is currently trading at $1.4075 as of 9:04am, London Time.

"It is becoming clear that risk appetite is starting to lack consistency and any catalyst could trigger a broad correction amid weak summer liquidity conditions," analysts at UBS said in a research note. "With the ECB and payrolls out tomorrow, the market is choosing to tread cautiously and we expect this to remain the dominant theme today." Investment Company Institute data released yesterday shows U.S. funds increased holdings of foreign assets to 24.5 percent last month from about 23 percent since Lehman Brothers Holdings Inc. collapsed in September, Mansoor Mohi-uddin, chief currency strategist at UBS in Zurich, wrote in a note today.

Today's Economic Events

Published on  Wed, Jul 1 2009, 11:54 GMT