Yen

The yen retained a firmer tone in Asia on Wednesday with support on dips towards the 105.0 level while the Japanese currency gained some further ground against the Euro.

Yield considerations will also remain very important for the currency. The latest data suggested that yen sales by Japanese individuals were at fresh 11-year highs as interest in carry trades remained strong and there will, therefore, be strong yen selling on any further rallies with volatility liable to be a key feature.

The dollar tested levels below 104.0 in European trading before rallying back to near 104.80 as Wall Street advanced and oil prices came under renewed selling pressure.

Sterling

The UK currency was little changed in early Europe on Wednesday with yield providing some degree of support.

The unemployment claimant count rose by 15,000 in June after a revised 14,300 increase the previous month which was the largest increase for 15 years and will reinforce expectations of a substantial economic downturn.

The earnings growth was little changed at 3.8% over the year which will offer reassurance to the Bank of England, although trends will continue to be monitored closely as wage bargaining becomes a key influence on inflation and inflation expectations.

Sterling weakened following the data and retreated back to below the 2.00 level against the dollar. It was able to regain ground in US trading and pushed to 0.7915 against the Euro as Euro-zone and US fears offered some protection while risk appetite also improved.

Swiss Franc

The Swiss currency briefly tested levels beyond 1.60 against the Euro on Wednesday as equity markets continued to weaken. The franc also re-tested levels below 1.0050 against the dollar.

Domestically, there was a firm retail sales report with a 7.4% annual increase for May which will provide some degree of franc backing.

The Swiss currency retreated in US trading following a strong rebound in equity markets as energy prices declines. Some speculation over dollar intervention also curbed immediate demand for the franc which weakened to lows around 1.0180 against the dollar.

Source: VantagePoint Intermarket Analysis Software

Australian dollar

The Australian dollar had been hampered late on Tuesday by a firmer US currency and a sharp drop in commodity prices. On Wednesday, Reserve Bank Governor Stevens reported that that it was more likely that the economy would slow and the comments clearly suggested that interest rates have peaked.

The remarks pushed the currency weaker and the Australian dollar was then hampered by a renewed decline in commodity prices. The Australian currency will still gain support from existing yield considerations and there is still likely to be strong buying on any significant corrections weaker. Net US gains and lower commodity prices still triggered a dip to 0.9735 in US trading.

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