Yen Down for Second Day, Dollar Steady as N. Korea Tensions Ease

The yen weakened past 110.00 per dollar for the first time in more than a week amid easing tensions with North Korea, as model-driven funds and other near-term trading accounts rebuilt shorts after a washout late last week.

The dollar advanced about 0.1 percent on the back of improving risk sentiment, better-than-expected economic data and rebalancing interest-rate expectations. The pound surged, wrapping up the session near its 2017 high as U.K. inflation data topped forecasts. U.S. PPI data on tap Wednesday and CPI figures due Thursday will set the tone for trading over the next couple sessions.

  • The yen fell vs all of its G-10 peers, with USD/JPY rising as high as 110.10 before paring gains; the pair saw choppy trading as stop-loss buy orders were tripped above 110.05 after offers ahead of 110.00 briefly slowed earlier gains. USD/JPY may face technical resistance at 110.47, the high from Sept. 1
  • A decision by the UN to impose fresh sanctions on North Korea risked further irritating the rogue state, though the measures were less harsh than the U.S. initially proposed, potentially softening the impact. Last week, the yen surged after North Korea threatened a new missile launch, and the softer sanctions may have been the result of Kim Jong-Un refraining from following through on that threat, one trader said
  • U.S. JOLTS jobs openings in July beat expectations, rising to a record 6.17m versus est. of 6m. Labor shortages in Fla. following Hurricane Irma might lead to pressure on wages, Ian Shepherdson of Pantheon Economics in a Bloomberg radio interview Monday
  • GBP/USD was trading at ~1.3290, its highest since September 2016. Sterling gained vs all of its G-10 peers as traders ramped up bets that the Bank of England may take a tougher line when it meets to decide on interest rates Thursday. Sterling was also supported by passage of a U.K. Parliamentary bill that removed a key hurdle in the Brexit process.
  • Bids to buy GBP are stacked below 1.3200, according to traders in Europe familiar with the transactions who asked not to be identified because they are not authorized to speak publicly. GBP may face resistance at the September 2016 peak ~1.3445 if the BOE adopts a more hawkish stance. U.K. inflation rose at a 2.9% annual rate vs 2.8% est.
  • EUR/USD reversed morning losses to trade with a slight gain at ~1.1963, after dropping as low as 1.1926 at the start of the U.S. session. Bids under 1.1920 may have helped cushion the drop, as the market continues to be jostled between bulls who favor buying on dips and longer-term investors who prefer to unwind EUR longs on moves above 1.2000, according to traders. EUR also gained some support from demand for EUR/JPY. Offer to sell EUR are positioned ahead of 1.2000, traders in Europe said

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