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The Yen outperformed overnight, picking-up ground against almost all of its peers in the Asian session as investors continued to shed holdings in Emerging Market economies in favour of the relative safety of Japan. The ongoing purge of EM positions relates back to the likelihood of tapering.

Sentiment overnight reflected expectations that US data, like tomorrow’s Pending Home Sales, would indicate that the American economy is strong enough for Chairman Bernanke to start tapering sooner rather than later. Also reinforcing the safety play were concerns that foreign governments/ the UN might intervene in Syria following yesterday’s comments from US Secretary of State John Kerry.

One of the Yen’s most significant gains was against the New Zealand Dollar, where gains were accelerated when the NZDJPY broke through support at the 200-day moving average and touched lows not seen since June. The Yen also made big gains against the British Pound, taking over 2-big figures as broad Sterling weakness compounded the GBP’s woes.

The EM sentiment and Syria concerns also helped shares lower through overnight trading. In Asia the Japanese Nikkei shed 0.69%, while Hong Kong contracted 0.59%. In Europe, the German DAX is off 1.58% and the British FTSE & French CAC are in the red by 0.63% & 1.53% respectively.

Despite the doom and gloom in news headlines, the results of the German IFO Business Climate survey were released overnight, slightly better than expectations, at 107.5. This is the highest read in a year and a half, and points to optimism amongst German businesses.   Markets have by and large ignored this however, as mentioned above, equity bourses are off on the day and the Euro has been on the defensive against many of its peers. The common currency, like the rest of the market, is softer against the Yen, giving back all of the gains from last week’s 6-session rally. Additionally, in line with the risk-off sentiment dominating currency markets this morning, the EURCHF has tumbled and is currently testing support at the 200-day moving average.

One of the few currencies that the Euro has made gains against is the Sterling. The British unit tumbled during the European session on speculation that Bank of England Governour Mark Carney will recommit to low interest rates for an extended period at a speech this week. These expectations pushed British yields lower, with the 10-year benchmark return tumbling the most in 6-months to 2.60%. The GBP sang the same tune, retreating broadly in the market, notably giving up a big figure against the USD.

There was no notable early morning data today in the Americas as the local session starts to pick up, though the Conference Board Consumer Confidence survey results are slated for release at  10:00am EST. Expectations are for a reading of 79.0, a higher result could lend additional support to the USD. On the flip side of that coin, it seems like it might take significant miss to outweigh the safety sentiment in markets and reverse the fortunes of the Greenback today.

Despite all of the action in other currency pairs, the USDCAD is trading in a narrow range this morning at yesterday’s levels. Off the charts, the pair posted a Doji formation yesterday, indicating that for the moment there might not be much appetite to push the USD higher following last week’s spectacular rally.

Further reading:

Dollar beginning to show strength

German IFO Business Climate beats expectations – EUR/USD hesitates