Yen bounces on safe haven demand

USD/JPY and JPY crosses moved lower in Asia with the Nikkei off large at the open and continuing lower in the afternoon. USD/JPY peaked at 118.01 following news of the CBR interest rate hike very early. It fell back later, initially to 117.66 before another leg through light stops at 117.40 to 117.30 in the afternoon as Nikkei losses swelled. Good support is eyed ahead of 117.00, levels targeted by Japanese importers and Japanese quasi-government/long-term investors like GPIF. $2.744 bln in vanilla option expiries at the strike also look to be supportive. EUR/JPY traded similarly, off from 146.71 to 146.20. Sentiment here looks to be more bearish given EZ negatives and suggestions of deflation. GBP/JPY fell from 184.55 to 183.56. AUD/JPY and NZD/JPY losses were more limited – off from 96.95 to 96.57 and from 91.26 to 90.88. Most still believe JPY to move lower in the next year, especially with current government and BoJ policies to remain in effect. With regard to the BoJ, more ease is possible. As to BoJ stock purchases, more may be needed and could be seen despite the central bank already exceeding its December purchase target.

EUR/USD opened in Asia at 1.2437 after being pressured overnight on widening US Treasury-Bund interest rate differentials as well as dovish comments from ECB’s Nowotny, uncertainty over Greece and EUR/JPY sales. Asia saw it consolidate between 1.2434-51 before a late blip up to 1.2463 on fresh USD/JPY weakness. EM currencies were a focus after the CBR rate hike but on little volume. USD/RUB fell 8% in response. AXJ currencies were mixed with the IDR down another 1.0% against USD while KRW strengthened 0.4%. Central bank expectations look to remain a major focus for EUR/USD into Wednesday’s FOMC meeting. Resistance remains ahead of 1.2500 and support down at 1.2360-70. E1.397 bln in 1.2500-strike option expiries will be seen at the New York cut today.

GBP/USD was softly bid from 1.5635 to 1.5658 as USD/JPY fell further. EUR/GBP did little, in a holding pattern between 0.7952-56 with so-so large option expiries at 0.7945 and 0.7975 bracketing the market.

USD/CHF traded heavy a la USD/JPY, off modestly from 0.9658 to 0.9636. EUR/CHF was immobile again at 1.2009-11.

AUD/USD opened in Asia at 0.8211 and saw a low of 0.8200 before bouncing in the afternoon to 0.8238. Support at presumed option barriers at 0.8200 held despite weak China PMI data. The barriers remain intact as the market could not trade through. Offers proved thick on the bounce later from around 0.8200 but were absorbed slowly.

The post Yen bounces on safe haven demand appeared first on Forex Circles.

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