Asian Currencies Rally Across The Board

Asian currencies were very volatile this morning after the Japanese yen climbed to trade under the 100 level against the US dollar late on Wednesday while the Aussie and the kiwi climbed on stronger jobs data out of Oz. Wednesday afternoon the US issued the Federal Reserve minutes from its July meeting. The minutes gave little direction but the shift in attitude towards a rate increase in 2016 surprised some traders.  The US dollar continued its recent declines to trade at 94.44 supporting its crosses.  US Federal Reserve policy makers last month believed risks to the US economy had lessened but wanted to keep their interest rate policy “options open,” according to the minutes.

Members also believed the global financial system had properly withstood any shock created by Britain’s June vote to exit the European Union, the minutes said. The minutes detailed policy makers’ differing views of the US economic outlook as they decided to leave a key interest rate untouched at 0.25-0.5 per cent.

The Japanese yen ls trading just at the 100 level today as the yen gained 42 points. Traders are mindful of intervention from the Japanese government. The EUR/JPY is holding at 113.09. The market had earlier attempted to shrug off Japan’s disappointing gross-domestic-product data for the April-June quarter released earlier this week, which weighed in at 0.2%, below an expected 0.7% expansion.

“On the one hand, the economy is not doing well which doesn’t look good for domestic profits of Japanese firms,” said Marcel Thieliant, senior Japan economist at Capital Economics. However, the weak figures increase the chance of more easing by the Bank of Japan, he said.

The Wall Street Journal reported that uncertainty about the Bank of Japan’s direction also continues to create instability in Tokyo markets. After the central bank decided on July 29 not to take significant new easing steps beyond an increase in purchases of stock funds, the yen rose because traders believed the central bank was unlikely to lower interest rates further. Monetary easing is one of the original “three arrows” in Prime Minister Shinzo Abe’s pro-growth “Abenomics” policy. In February, the Bank of Japan introduced a minus-0.1% rate on certain deposits held by commercial banks at the central bank. Data this morning showed that exports declined at an annualized rate of 7.4% in June after falling 11.3% the month before, the Ministry of Finance said in a report on Monday. A median estimate of economists called for exports to decline 11.6%.

Imports plunged 18.8% annually, following a 13.8% annualized drop in May. Economists expected imports to fall 19.7% over a year ago. As a result, the country’s trade balance improved to ¥692.8 billion.

Also in Asia this morning Australia data showed a sharp decline in the unemployment rate helping the Aussie to gain 40 points to trade at 0.7708 after the better than expected July jobs report showed the economy created more than twice the number of jobs the market had been forecasting. The increase of 26,200 easily eclipsed the 10,000 estimate and it helped propel the AUDUSD and dragging the kiwi along in its trail. The NZD added 27 points to reach 0.7286.