Yen Strengthens to Six-Week High Against Dollar on Haven Demand

  • Greenback weaker against all but one of G10 currencies
  • Aussie rebounds from lows after RBA keeps rates unchanged

The yen rose to a six-week high against the dollar as a decline in stocks and falling Treasury yields prompted haven demand for the Japanese currency.

The greenback weakened against all but one of its Group-of-10 peers. The dollar-yen fell below the psychologically important 110 level for the first time since April. The Australian dollar rebounded from earlier lows after the Reserve Bank of Australia kept its benchmark interest rate unchanged, in line with market forecasts.

“The market is selling USD/JPY to adjust positions ahead of major events scheduled on Thursday,” said Kumiko Ishikawa, forex market analyst at Sony Financial Holdings in Tokyo. “The dollar’s fall could pick up momentum if it breaks sharply below 110 yen.”

With central bank policy makers in the U.S. and Europe all in quiet periods ahead of key policy decisions, attention this week has shifted to Britain’s election and testimony from former FBI head James Comey on Thursday.

  • USD/JPY slides 0.5% to 109.90; earlier reached 109.73, lowest since April 25
    • Leveraged selling of USD/JPY on break of Ichimoku cloud support further erodes spot level and brings 110.00/10 bids for real money funds into play, says an Asia-based FX trader; adds that clients citing weak stocks and falling U.S. Treasury yields as drivers
    • “There are few incentives to buy the dollar now as some concerns about the outlook for the U.S. economy are growing after yesterday’s ISM report fell below expectations,” Tsutomu Nakamura, strategist at Ueda Harlow in Tokyo, writes in a note
      • Says USD/JPY could test below psychological level of 110 yen if the market finds any negative factors from geopolitical risks stemming from Qatar, Comey’s testimony and the U.K. election
  • AUD/USD rises 0.1% to 0.7491 after earlier slipping to 0.7457
    • The absence of an explicitly dovish statement has seen A$ support via AUD/NZD intraday buying, spot back to 1.0460 off a 1.0430 low, according to a trader
    • AUD/USD earlier sold hard as 1Q balance-of-payments data compelled dealers to short spot against intraday long stop-loss orders left under the London low, according to Asia-based FX traders
    • 1Q current-account deficit A$3.1b vs est. A$0.5b

Some information comes from FX traders familiar with the transactions who asked not to be identified because they aren’t authorized to speak publicly.

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