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    Asian Session – Data points to signs of recovery in Japan; dollar near 8-month highs

    Industrial production data out in Japan showed output expanding for a second month in-a-row in October, raising expectations that the economy will bounce back in the final quarter of the year. Industrial output was up 1.4% m/m in the preliminary estimate for October. Although the figure was below forecasts of 1.9%, the increase was encouraging and there were further signs of a rebound from retail sales figures. Retail sales rose by 1.8% y/y in October, sharply above estimates of 0.8%.

    Meanwhile, the Bank of Japan Governor, Haruhiko Kuroda, today reiterated the Bank’s commitment to raising inflation to the target level as quickly as possible. Speaking at a meeting of business leaders, Kuroda said “If the BOJ were to move slowly toward achieving the price target, wage adjustments would also be slow”.

    The yen was initially firmer on the data but was slightly down on the day in late Asian trading. the dollar climbed to 122.81 yen from an earlier low of 122.68 yen. The euro was also higher against the yen, rising to 130.03 yen.

    The Chinese yuan continued to depreciate against the US dollar ahead of a decision by the International Monetary Fund today on whether to accept the currency into its Special Drawing Rights basket of currencies. China’s central bank has been intervening in the markets to limit the losses but expectations are that if the IMF decides to add the yuan to its SDR basket, the PBOC will pare back its intervention. The dollar was slightly up at 6.3975 yuan in late Asian session.

    The euro came close to hitting a new 7½-month low against the dollar as it continues to come under pressure ahead of the European Central Bank’s policy meeting on Thursday when it’s expected the ECB will announce fresh new stimulus measures. The single currency was last down at 1.0585 dollars.

    The pound bounced back slightly against the dollar in late Asian trading, rising to 1.5041 after hitting a 7-month low of 1.5014 earlier in the session as investors push back their expectations of when the Bank of England will raise interest rates.

    In commodities, gold extended Friday’s losses to trade near 6-year lows of $1.056.80 on the dollar strength, which came close to surpassing the 12-year high set back in March.

    Coming up later today, German flash inflation numbers for November will be the main data in European trading, while in the US session, the Chicago PMI and pending home sales will be closely looked at.

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