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    European Session – Dollar pulls away from 2-week high versus yen, oil prices rebound as inventories drop

    The US dollar reversed recent gains today, especially against the yen. The dollar reached a two-week high after being lifted by comments from Japan’s Finance Minister Taro Aso who said earlier this week that the Bank of Japan was ready to intervene in the markets in order to prevent further yen appreciation if necessary.

    The greenback reversed from the peak of 109.36 and accelerated its decline after breaking below the key 109 yen level. The pair was down 0.6% on the day so far around 108.68 yen.

    Sterling fell after UK manufacturing data missed forecasts. Industrial production rose by 0.3% month-on-month in March, below expectations of a more robust bounce back of 0.5%. However, February’s reading was revised slightly higher to reflect a 0.2% drop from 0.3% drop previously.

    After a brief dip to $1.4393 following the data from above $1.4450, the pound recovered quickly to rise back to the $1.44 handle.

    The main risk event for the British currency will be on Thursday. The Bank of England holds a policy meeting and will release its quarterly inflation report. A cut in growth or inflation forecasts will have a negative impact on the pound. Focus will also be on BoE Governor Mark Carney’s press conference for any clues into the Bank’s policy on interest rates and Brexit concerns.

    In the absence of economic data, the euro was able to rise against the dollar for the first time in six days. After a dip below the key $1.14 level, the single currency rose to test $1.1433 today.

    US oil futures rose 3% above the $45 a barrel mark after the EIA crude oil inventory report. The data showed there was a big drawdown on oil stocks last week, down 3.4 million barrels. Inventories were expected to rise by 1.5 million barrels, so the surprise drop helped lift oil prices to $45.60.

    The rise in oil prices positively impacted the commodity-linked Canadian dollar. As a result, USDCAD fell back below the $1.29 level to $1.2863.

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