Analysis FOREX. Asian Session – Yen eases as oil stabilizes; Pound falls below 1.40 dollars

The Japanese yen pulled back from its recent highs in late Asian trading on Wednesday after oil prices attempted to move higher again. Oil futures fell sharply on Tuesday after Saudi Arabia ruled out output cuts anytime soon. US crude futures fell back below $32 a barrel and were last trading at $31.34 a barrel, slightly up on yesterday’s close.

The US dollar rebounded from an intra-day low of 111.63 yen to jump to 112.21 yen in late Asian session. The euro and the pound also gained against the Japanese currency to climb to 123.55 and 157.17 yen respectively.

Comments from Bank of Japan Governor Haruhiko Kuroda earlier in the day had limited impact on the yen. Kuroda said in an interview on Wednesday that the Bank of Japan stands ready to ease monetary policy further should the recent market turbulence start to hurt the Japanese economy.

In contrast, the Fed Vice Chair Stanley Fischer said it was too early to say if the market volatility will have any damaging impact on the US economy. Speaking on Tuesday, Fischer suggested he would allow for a “modest overshoot” above full employment level to help inflation recover towards its goal, indicating he was in no rush for further rate hikes.

The euro continued to be weighed down by recent weak business survey data. It managed to hold just above 1.10 dollars in late session. The pound was also under continued pressure as the uncertainty over the EU referendum hangs over the currency. Sterling slipped to fresh 3-year lows versus the dollar today, dropping below the 1.40 handle for the first time since March 2009. It was last trading at 1.3983 dollars.

In Australia, the latest wage growth and construction data for the fourth quarter disappointed, increasing the scope for further rate cuts by the RBA. The Australian dollar dipped below 0.72 dollars as a result and was last trading at 0.7183 versus the greenback.

Meanwhile, gold prices yesterday reversed the previous day’s losses and were steady on Wednesday at $1225 per ounce.

The rest of the day is looking relatively quiet with the only major data coming from the US which include new home sales, Markit Services PMI and crude oil inventories.

Source: XM Broker

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