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    Asian Session – Yen pulls back as risk-off eases ahead of FOMC; euro pressured by negative bund yields

    Risk appetite improved in Asian trading on Wednesday, though Brexit fears continued to weigh on market sentiment. Asian equities attempted a rebound as most major indices shrugged off sharp losses in European stocks yesterday to turn positive in late Asian session today.

    The yen fell back against its peers as safe-haven demand eased but it remained not too far from Tuesday’s lows. The dollar edged up to 106.25 yen, having touched a low of 105.62 yen yesterday. Stronger-than-expected retail sales out of the US on Tuesday further supported the greenback.

    The euro and the pound also firmed against the Japanese currency, climbing to 119.27 and 150.55 yen respectively in late Asian trading.

    Ten-year German government bond yields were back in positive territory today after turning negative yesterday for the first time. The rising risk of the UK leaving the European Union has pushed government bond yields to record lows in recent days as investors seek shelter from the uncertainty.

    The declining yield of German bunds has put pressure on the euro, which hit a low of 1.1188 dollars yesterday. But the single currency had rebounded to 1.1223 dollars in today’s Asian session.

    The pound also moved higher against the dollar and was last trading at 1.4166 dollars. Fresh Brexit polls showing a lead for the ‘leave’ camp had pushed sterling to a two-month low of 1.4090 dollars yesterday.

    The Chinese yuan fell to a five-year low on Wednesday after the People’s Bank of China set the weakest midpoint since January 2011. The yuan hit an intra-day low of 6.6043 per dollar in onshore trading but firmed to 6.5930 in late Asian session. The PBOC has let the yuan slide lower in recent days as Brexit-related risk aversion and disappointing Chinese business spending figures have increased pressure on the currency.

    The Australian and New Zealand dollars were also firmer today despite weaker commodity prices. The aussie had fallen to 0.73333 earlier in Asian session following a drop in the Westpac consumer confidence index for June. But the currency later recovered to 0.7383 versus the greenback, while the New Zealand dollar climbed to 0.7028.

    Crude oil prices stabilized on Wednesday following four straight days of losses. US oil futures hit a four-week low of $47.55 a barrel yesterday following a surprise rise in US oil inventories yesterday, according to data from the American Petroleum Institute. However, prices steadied today to trade around $48 a barrel.

    Coming up later today, UK unemployment figures and US producer prices will be the main data of the day before the FOMC decision, which is due at 18:00 GMT. The Fed’s latest policy announcement will be followed by a press conference with Fed Chair Janet Yellen at 18:30 GMT. Although the Fed is not expected to raise rates at today’s meeting, markets will closely scrutinize the Fed’s latest economic projections and Yellen’s press conference for any clues to a possible July rate hike.

    Risk Warning: Forex, Commodities, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you fully understand the risks involved and do not invest money you cannot afford to lose. Please refer to our full Risk Disclosure.

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