Daily Forex Outlook: Yen (JPY) Extends Slide vs. Greenback (USD) on Fed Minutes

The yen hovered near a four-year low against the US dollar after the minutes from the latest policy meeting of the Federal Reserve fuelled speculation that the US central bank would scale back its bond-buying programme by the end of the year.

The Fed minutes also helped the euro retreat from its one-month high against the greenback. In Australia, an unexpected rise in the nation’s unemployment rate sent the Australian dollar (AUD) lower against its US counterpart.

Newswires reported that the yen traded at 99.65 per dollar early on April 11, after plunging to 99.88 late on April 10, the yen’s lowest level since April 14, 2009. Japan’s currency lost ground against the dollar, after the minutes of the Fed’s policy meeting raised expectations that the US central bank would slow down the pace of its quantitative easing.

As Reuters reported, the minutes showed that several policy makers expected to reduce asset purchases by mid-year and end them later in 2013, while a few others expected to slow down the bond-buying pace a bit later and halt the quantitative easing programme by the end of the year.

The possibility of the Fed ending its quantitative easing this year is in contrast with the stance of the Bank of Japan which last week said it would increase its monthly bond purchases and set a two-year timeline for achieving its two percent inflation target.

The Fed minutes lifted the greenback against the single currency which slipped to $1.3054, down 0.1 percent from late US levels and off its one-month high of $1.3122 set on April 10.

As reported by Bloomberg, Italy prepares to auction as much as €7.5 billion (£6.4 billion) of debt, pushing the total amount of bonds and notes sold by Eurozone governments this week toward the most this year.

The Aussie weakened across the board after the statistics bureau reported that Australia’s unemployment rate rose to 5.6 percent in March, the highest since 2009, from 5.4 percent in February, with the news prompting speculation of a rate cut by the Reserve Bank of Australia (RBA). As Bloomberg reported, Australia’s currency shed 0.2 percent to trade at $1.0521 against the US dollar.

Bloomberg quoted Andrew Salter, a foreign- exchange strategist at Australia & New Zealand Banking Group Ltd (ASX:ANZ, NZE:ANZ), as expecting “weakness on the crosses for the next couple of days, as the view on a recovery in the Australian labour market remains challenged, and also the RBA retains its easing bias”.

Bloomberg reported that the New Zealand dollar (NZD) rose against its US counterpart, following a report showing that the nation’s manufacturing industrial output expanded in March. In addition, an index measuring New Zealand’s home prices rose in March to an all-time high. The kiwi climbed 0.2 percent to trade at 85.93 US cents.