Yen Falls Amid Risk Appetite

00:14, 20th October 2014

(RTTNews) - The Japanese yen weakened against the other major currencies in the Asian session on Monday, helped by an increase in risk appetite on brightening global growth prospects following the release of solid U.S. economic data.

The U.S. economic data released on Friday bolstered hopes concerning global growth, prompting investors to reduce holdings of safe haven currencies such as the yen. Investors also hope that the U.S. Federal Reserve may delay ending its asset purchase program.

U.S. housing starts beat expectations and consumer confidence climbed unexpectedly to the highest since July 2007.

A report that said the Japanese pension fund will increase its allocation target for local shares to 25 percent is also contributing to the market's upward move along with an increase in risk appetite.

Speaking to the central bank's regional managers at the meeting today, Bank of Japan's Governor Haruhiko Kuroda said that Japan's economy is recovering gradually though output has shown weakness.

The recovering trend is expected to continue as the effects of consumption tax begins to wane, he said. He added that core inflation is likely to remain at 1.25 percent in the future. Kuroda noted that the bank's policy of quantitative and qualitative monetary easing, which is exerting the desired effects, will be maintained as long as needed to achieve 2 percent inflation.

The yen fell against the other major currencies last Friday, although it saw some upside in the New York session. On Friday, the yen fell 0.31 percent against the euro, 0.48 percent against the pound, 0.32 percent against the Swiss franc and 0.45 percent against the U.S. dollar.

In the Asian session, the yen fell to nearly 2-week lows of 85.34 against the the NZ dollar and 113.36 against the Swiss franc, from last week's closing quotes of 84.55 and 112.89, respectively. If the yen extends its downtrend, it is likely to find support around 85.90 against the kiwi and 113.78 against the franc.

Against the pound, the yen slipped to a 1-week low of 172.75 from last week's closing quote of 171.91. The yen may test support near the 174.30 region.

The yen dropped to a 5-day low of 107.25 against the U.S. dollar, from last week's closing quote of 106.84. On the downside, 108.30 is seen as the next support level for the yen.

Against the Australia and the Canadian dollars, the yen fell to 6-day lows of 94.20 and 95.26 from last weeks closing quotes of 93.43 and 94.70, respectively. The yen is likely to find support near 95.96 against the aussie and 96.30 against the loonie.

Looking ahead, final August leading index for Japan is due at 1:00 am ET.

At 2:00 am ET, German producer prices index for September is due to be released.

In the European session, Eurozone current account data for August is due to be released.

Canadian wholesale sales for August is due in the New York session.

At 10:00 am ET, Federal Reserve Governor Jerome Powell will deliver a speech about community banking at the St. Louis Federal Reserve Webinar and Conference Call via satellite.