The dollar dipped versus the yen on Monday

Good Morning,

- Euro struggles versus dollar near 4-month low. Market participants expect the single currency to come under further pressure against the dollar should the Fed's statements on Wednesday cause a further divergence in monetary policies between the ECB and the Fed.

- Asian shares: Japan's Nikkei -1.09%, Hong Kong's Hang Seng -0.15% (07:10 GMT), Korea's Kospi 0.14%, Australia's ASX 200 0.13% and China's Shanghai 0.74%.

- Sterling, which has been boosted recently by the hawkish approach taken by the Bank of England, hit above 1.70 level, highest since August 2009. BOE Governor Mark Carney had said on last Thursday that interest rates could rise sooner than financial markets expect, in a surprisingly stark warning that monetary policy may start to tighten in less than a year. The euro fell to as low as 79.62 pence, a trough not seen since November 2012.

- Bank of England Deputy Governor Charles Bean says he will welcome the first hike in Bank Rate as a symbolic step along the road to recovery. Bean, in a Sunday Times interview, says having interest rates still on emergency settings is not desirable. The first hike "will be a symbolic step, because it will be an indication that we are on the road back to normality," Bean says. "I would welcome us getting back on the path of normalization, as a demonstration that the economy is healing. Frankly, having interest rates at an emergency level for a very long time is not a situation one wants to be in," Bean says.

- BNP Paribas on EUR/USD : USD: Bullish. As Q2 comes to a close, the USD continues to garner momentum, despite US front-end yields remaining low. A sustained upturn in both US data and US yields will be particularly supportive of the USD. With the consensus view still bullish the USD, we expect to see good interest to rebuild exposure if macro drivers cooperate. We expect EURUSD to drop to 1.35 by the end of Q2.EUR: Bearish. The negative deposit rate should be enough to keep the EUR’s downtrend intact especially as the ECB leaves the option of following up with large-scale asset purchases on the table. The ECB’s ability to lift eurozone inflation expectations will be key, as real rates to be the key transmission mechanism from monetary policy to the currency, with the EUR increasingly assuming a funding currency role.

- The dollar dipped versus the yen on Monday, taking a cue from weaker Tokyo equities, although potentially decisive events such as the Federal Reserve meeting midweek limited movements. The dollar trade to 101.72 yen low, moving towards the bottom of its relatively tight 102.80-101.60 yen range seen so far this month.

- The Bank of Japan’s unprecedented asset purchase program has released a creeping paralysis that is freezing government bond trading, constricting the yen to the tightest range on record and braking stock-market activity. Historical price volatility on Japanese bonds slid to a 1 1/2-year low of 0.913 percent on June 13 and a lack of activity delayed trading at least four days last week. The yen has traded in a range of 4.68 per dollar since Jan. 1, the tightest since Japan ended currency controls four decades ago. Average trading on the Topix index is near its lowest level in more than a year.

- The New Zealand dollar hovering near a one-month high of $0.8700 hit late last week when the Reserve Bank of New Zealand indicated it would continue hiking rates.

- Australia's dollar is emerging more like a ''safe haven'' asset, with currency continuing to strengthen in the wake of heightened volatility across global financial markets. Fears of another Gulf war looming amid growing instability in Iraq has battered market sentiment and spurred buying of assets traditionally considered ''safe'', such as gold and US Treasury debt. But the Aussie - which investors have long treated as a ''risk'' asset, ditching it in times of uncertainty and unrest - has continued to rise, perplexing economists and currency strategists.

- Gold hit its highest in nearly three weeks as the Iraqi crisis supported the metal's safe-haven appeal, rising to $1,282 an ounce the highest since late May.

Have a nice Week!

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