Yen supported by Abe’s victory

USD/JPY and JPY crosses saw large swings in Asia on event risk and moves in other financial markets. Thin conditions in the run-up to Christmas/New Year’s helped with hedge funds in particular sidelined after the end of their financial year in November. USD/JPY surged from 118.73 to 119.13 very early in Wellington. It plunged to 117.78 as the rest of the region began trading in typical buy-the-rumor/sell-the-fact trading after Japan PM Abe/LDP’s landslide victory at Sunday polls. A not-as-bad-as-expected BoJ Tankan and limited Nikkei losses despite the plunge on Wall Street Friday along with Gotobi demand at the Tokyo fix helped USD/JPY bounce to 119.06 later. From 119.06, it eased back below 119.00 and into a 118.50-119.00 range. USD/JPY could very well consolidate for now mostly between its Ichimoku kijun-tenkan lines at 117.86-119.65 till the next event risk.

EUR/USD opened in Asia at 1.2465 after gains Friday as weaker crude oil prices favored energy importers as opposed to producers. Up to 1.2485 early as USD/JPY plunged, EUR/USD drifted back down to 1.2434 as USD/JPY reversed higher. EUR/USD could remain firm early in the week but volatility is likely to return into the FOMC meeting Wednesday. EUR could currently be on the precipice of further moves down if the FOMC looks past falling crude oil price and implications for inflation and focuses instead on improving US growth, and especially so with the ECB expected to ease aggressively in the new year.

GBP/USD fell back in sympathy with EUR/USD from an early high of 1.5742 to 1.5705. EUR/GBP traded on the soggy side between 0.7917-36 after the bounce to 0.7940 Friday.

USD/CHF was bid, up from an early low of 0.9610 to 0.9682 as USD/JPY surged back up towards early highs after its plunge. EUR/CHF was immobile between 1.2010-13.

AUD/USD opened in Asia at 0.8251, a bit higher than 0.8240 where it closed out New York trading Friday. Trading was quiet early and within a tight 0.8230-54 range. Reports of a hostage situation in the building housing the RBA saw AUD/USD fall back to 0.8204. A reversal up in USD/JPY following early weakness helped. The market steadied thereafter above 0.8200. The higher deficit announcement did work to cap the topside around 0.8230.

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