Forex - Yen steadies after overnight slide following soft Japanese CPI |
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Fri, 26 Jan 2007 10:17
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LONDON (AFX) - The yen steadied after being pushed onto the defensive overnight by relatively soft Japanese inflation data, which cast further doubt on the likelihood of a rate hike next month from the Bank of Japan.Figures showed that the December national core CPI rate decelerated to 0.1 pct on an annual basis from expectations of a second consecutive 0.2 pct rise. In addition, the measure, which excludes food and energy, actually fell 0.3 pct.'The data support the government's view that Japan is not yet out of deflation and the BoJ should be cautious with cuts,' said Ian Stannard, currency strategist at BNP Paribas.'Easing rate expectations did put the yen under pressure in the overnight, but we warn over the risks of further carry trade unwinding that could offset this data impact,' he added.The yen has suffered after the BoJ's failure to raise interest rates last week and mounting speculation that weakness in the Japanese currency will be a key focus at the upcoming G7 meeting of finance ministers in Germany.Elsewhere, analysts said this morning's euro zone money supply data are likely to reinforce concerns over monetary growth at the European Central Bank, which could provide the single currency with some support.'Strong, albeit slower M3 growth should provide the euro with some support by acting as a reminder of more interest rate hikes to come,' said Stuart Bennett, analyst at Calyon.The ECB has been gradually raising its key refi rate to the current 3.50 pct and is widely expected to continue lifting borrowing costs over the coming months, at least to 4.0 pct.The dollar has also been buoyed recently by diminishing expectations of any imminent rate cut from the US Federal Reserve, which has kept its benchmark rate unchanged at 5.25 pct for four consecutive meetings after raising it 17 times in a row.Analysts said today's new homes sales data are likely to give some support to that view, which appears to be shared by Fed rate-setter Susan Bies, who last week suggested that the correction in the US housing market was 'getting close to bottoming out'.Meanwhile, the pound remains under pressure after its short-lived move above 1.99 usd. Its rally to the psychologically important 2 usd level was brought to an abrupt halt when it was revealed that the Bank of England's surprise decision to raise interest rates in January was tighter than had been expected.'A close below 1.9572 usd would leave the currency pair recording a key week-reversal formation and this would be a signal of potential medium term top in the market,' said Steve Pearson, currency strategist at HBOS.'With the dollar currently rallying against European currencies we remain bearish on the pound,' he added.London 0838 GMT Singapore 3.35 pm (0735 GMT)US dollaryen 121.55 up from 121.51sfr 1.2512 up from 1.2491Eurousd 1.2911 down from 1.2930yen 156.90 down from 157.15sfr 1.6155 down from 1.6156stg 0.6578 up from 0.6575Sterlingusd 1.9628 down from 1.9665yen 238.55 down from 238.95sfr 2.4556 down from 2.4558Australian dollarusd 0.7730 down from 0.7747stg 0.3940 up from 0.3938yen 93.94 down from 94.13pan.pylas@thomson.comjkm/roCOPYRIGHTCopyright AFX News Limited 2006. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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