Yen at two-month low versus dollar on Wall Street surge

USD/JPY at highest since July

USD/JPY rallied to its highest level since July 19 as the positive sentiment that lifted Wall Street to record highs continued in the currency markets during the Asian session. The response in Asian equities was not quite so dramatic with the Japan 225 index gaining 0.25% by lunchtime, the Hong Kong 33 CFD rising 0.25% and the China A50 index surging 1.32%%.

Japan shares shrugged off an uptick in longer-term yen yields after the Bank of Japan trimmed its daily purchases of Japanese Government Bonds with a tenor of 25 years and upwards. The 30-year yield hit its highest since October 2017 and the 40-year tenor saw rates at 1.02%, the highest since November 2017.

USD/JPY Weekly Chart

Source: Oanda fxTrade

USD/JPY is poised for its second weekly gain in a row and is heading toward the 200-week moving average at 113.26 while the July high sits at 113.18.

Japan CPI heads in the right direction

A welcome headline for the Bank of Japan saw Japanese consumer prices rise 1.3% year-on-year in August, the fastest pace since February. The headline topped expectations of a 1.1% increase and was a steep acceleration from the 0.9% seen in July. Core CPI was a more benign +0.4% y/y, in line with expectations and higher than July’s 0.3%.

In other Japanese news, Shinzo Abe was elected for his third term as leader of the LDP yesterday and is set to become the country’s longest-serving leader. He wasted no time in getting back down to business as Chief Cabinet Secretary Suga announced that PM Abe will hold a summit with US President Trump on September 26. There is no doubt that the tariff question will be the major topic under discussion.

US-China trade war, yesterday’s news?

S&P Raises Australia outlook to stable

Ratings agency S&P affirmed Australia’s sovereign rating at AAA and raised the outlook from negative to stable. The agency cited an improved fiscal outlook amid government expenditure restraint, with steady revenues supported by the strong labor market and relatively robust commodity prices. The top three ratings agencies now have Australia with a AAA rating and a stable outlook.

There was a muted response to the news from the Aussie as AUD/USD marked time ahead of the 55-day moving average resistance at 0.7315. The pair is currently almost flat on the day having risen for the past four sessions and is facing its strongest up-week in over a year. AUD/USD is now at 0.72935.

AUD/USD Daily Chart

Source: Oanda fxTrade

More PMI readings complete a slow data week

The slow data week concludes with September Markit PMI readings for both Germany and the Euro-zone, with both expected to show a lower reading than last month. The North American calendar is focused on Canada’s CPI readings for August followed by the Markit PMI data for the US. In contrast to the European readings, those are expected to rise and confirm the robust state of the US economy and could help fuel further gains on Wall Street.

You can view the full MarketPulse data calendar at: https://www.marketpulse.com/economic-events/

Have a great weekend.

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