No Key Data Today.
Currencies traded in a tight range during the Asian session, little changed from overnight levels. However, the yen added to yesterday's gains against the euro, rising to a week's high of 106.33 after hitting a seven-week high of 108 yen in European trade on Wednesday. The yen also continued to hug the 124.00 support level against the dollar after yesterday's rise in the euro to a two-week high of $0.8621, which dragged the dollar lower across the board. USD/JPY
The dollar found support against the yen after falling to a 1-week low of 123.87 overnight, hurt by the unwinding of yen carry trades as well as market uneasiness with the strong dollar. The favorite low interest lenders were the yen and Swiss franc, causing no surprise that both had surged as short positions were unwound. Moreover, Just last week the dollar hit eight-month highs against the Swiss franc at 1.8216, only to fall to a seven-week low of 1.7555 by late Wednesday.
forexnews.com // The Bank of Japan commenced its two-day monetary policy meeting but almost no one in the market expected any change. The BoJ is widely expected to hold off on more monetary easing, especially now that political pressures disappear for the Bank to take further action. Minister of Finance Shiokawa says he won't put strain on BoJ to ease policy but agreed that more public funds can be injected into banks if needed.
Before their last meeting, Taro Aso, policy chief of Japan's Liberal Democratic Party, said that the central bank's easing steps in March were a step in the right direction but not enough to revive the ailing economy. With public debt around 130% of GDP and Prime Minister Koizumi promising to limit the issuance of new debt to around 30 trillion yen per year, many members of the government want monetary policy move in line with structural reforms. Yet, a collective cry for help before the BoJ meeting on June 15 yielded nothing more than Governor Hayami's assurance that the Bank was ready to take additional action if unforeseen events occurred.
From a fundamental perspective, Japan's deteriorating economy - which is aggravated by a liquidity trap -will continue to weigh heavily on the yen. A reiteration from ratings agency Moody's that Japan's credit rating remained under pressure had a limited impact on the market.
Meanwhile the dollar held onto yesterday's gains against the euro after it slipped over one-fourth cents to break below the 86-cent mark following remarks by a US Treasury official that the US still supported a strong dollar. This unraveled some of the single currency's three-cent rise on the back of criticism of the dollar's strength. The euro also fell from a 2-week high of 86.44 cents due to its fall against the yen after a strong appreciation in early Wednesday trade. A strong bullish move over the last four days appears to be running out of steam, but emerging market fears, which drove funds into the Swiss franc and thus pulled the euro higher as investors were discouraged by the strong dollar and falling US equities maintained the euro above support at 85.60.
The dollar was also unchanged against the pound, hovering near a day's high of $1.4082 as it was also steady around a day's high of 60.81 pence to the euro. With no economic data releases for the Eurozone today, traders will assess the release of the British Chamber of Commerce Survey for Q2 to obtain a better sense about UK economic conditions. Support stands at 1.4070 and 1.4050. Resistance is eyed at 1.410 and 1.4170.