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    Asian Session – Japanese Yen retains gains vs dollar after strong trade data

    Posted on February 19, 2015 by the XM Investment Research Desk at 8:14 am GMT

    japan-just-released-a-bunch-of-economic-data-that-shows-the-economy-continues-to-recoverThe yen managed to keep the dollar below the 119 level, after trade data for January showed both exports expanding much more than expected as well as imports contracting.  Therefore the country’s trade deficit was about 500 billion yen narrower than anticipated by forecasts.  This was a further indication that the weakness in the yen is helping the country’s trade performance but the drop in imports – although helpful for economic growth – also shows problems in domestic demand.

    The dollar received some negative news the previous day in the United States, as the minutes of the Fed’s policy making committee showed “many” of its members were concerned that a premature rate hike would cause the US economic recovery to stall.  Furthermore, the Fed showed concern about the impact of a strong US dollar on exports and about negative international developments such as war and tensions in Ukraine and the Middle East and a slowdown in China.  The minutes lowered the probability of a rate hike as soon as June and brought down US Treasury bond yields.  This had the effect of taking away support from the dollar.  The euro recovered above the 1.14 level against the dollar after the dovish Fed minutes and reached a session high of 1.1423 in Asia.

    Apart from the yen and the euro, sterling and the aussie also took advantage of poor dollar sentiment in order to advance.  The euro and risk sentiment in general were boosted by optimism that a deal on continued financing for Greece would soon be found.  Greece was set to apply for a 6-month extension of its loan agreement today, although it was not clear whether the country would accept the conditions attached to the loans and if a Eurogroup meeting would be convened on Friday to study the Greek proposal.

    Trading volume in Asia was negatively affected by the Lunar New Year holidays, which were observed in many countries outside Japan and Australia.

    Looking ahead, no major economic releases are expected.  Eurozone current account for December will be followed by February’s consumer confidence numbers for the single currency area.  In the United States, the Philly Fed Index for February will be released.  Today is also a historic day for the European Central Bank as it publishes its first ever meeting minutes – an item that the market will look at closely.  A speech by ECB council member and Bundesbank President Jans Weidmann on monetary policy will also be watched.

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