Daily Forex Outlook: Yen (JPY) Under Speculation Pressure

on Nov 30, 2012

Renewed discussions about the impending expiry of tax cuts in the US, known as the fiscal cliff, dragged the dollar down but boosted the euro, which advanced despite data showing an increase in German unemployment. The yen, however, declined after the leader of the Liberal Democratic Party (LDP) and potential future prime minister Shinzo Abe repeated his calls for the Bank of Japan to stimulate the economy.

**Yen Down on Abe Remarks**
On November 30, Reuters reported that the yen reached 107.30 per euro, its weakest level since April 27, before trading at 107.16, or 0.5 percent lower than the close in New York. Japan’s currency lost ground against the US dollar as well, falling 0.4 and trading at 82.42 per dollar. The yen’s downward movement was prompted by Mr Abe who called for all needed measures to boost inflation to two percent. “Abe’s remarks are pulling down the yen,” noted Kazue Shirai, a trader at Union Bank NA.

The yen, however, also suffered from data showing that Japan’s consumer prices stagnated in October relative to a year earlier, following a 0.1 percent decline in September.
Bloomberg also quotes Akira Moroga, manager of foreign-exchange products at Aozora Bank Ltd (TYO:8304) as saying that the yen has entered a weakening trend, with “many players out there who want to buy the dollar-yen.”

**Fiscal Cliff Optimism Dragging the Greenback Down**
The dollar, however, is off to a weak start on November 30, with fiscal cliff optimism again benefitting riskier assets. Bloomberg reports that the greenback was near a one-month low against the euro, with Democrats and Republicans wrangling over the spending cuts and tax increases of the fiscal cliff. “It’s a positive that both Republicans and Democrats are negotiating over the fiscal cliff,” noted Mr Shirai, as quoted by Bloomberg. The dollar index slid 0.1 percent to 80.121, declining for a third day in a row.

**Euro Advances despite German Unemployment Data**
!m[Fiscal Cliff Talks Weigh On The Dollar (USD) But Lift The Euro (EUR)](/uploads/story/937/thumbs/pic1_inline.png)Fiscal cliff-related optimism however was beneficial for the single currency, which shruged off data showing that unemployment in the Eurozone’s largest economy rose for the eighth month in a row in November. The FT reports, however, that the 6.9 percent increase in German unemployment was in line with expectations. As reported by Bloomberg, the US dollar lost 0.2 percent against the euro to trade at $1.3004, after touching $1.3014 on November 29, the lowest since October 31.

**Asian Currencies Close to 15-Month High**
On November 30, Bloomberg reported that Asian currencies advanced for a second week, approaching an almost 15-month high, with the hope being pinned on the fiscal cliff in the US being averted. India’s rupee was headed for its best week since October, rallying 1.9 percent from the previous week to 54.45 per dollar. Indonesia’s rupiah ended a six-week slump and gained 0.5 percent to 9,603, whereas Malaysia’s ringgit strengthened 0.4 percent to 3.0443. South Korea’s won, which had a strong week, rose 0.3 percent to 1,082.93 and China’s yuan traded at 19-year high.
“The biggest driver is the US fiscal situation,” points out Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken (STO:SEB-A, STO:SEB-C), as quoted by Bloomberg. “If you look at a one-month time horizon, we think they’ll reach a deal on the fiscal cliff, so Asian currencies will probably continue to appreciate.”


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