The yen strength continued into Asian trading today with the USD/JPY dropping to an eight month low at 86.25 as the dollar weakened. Earlier comments in New York from Federal Reserve St. Louis President Bullard spooked markets with his unusually dovish tone as he commented that, “the US is closer to a Japanese-style (deflationary) outcome today than any other time in recent history…” He added that although the need for further easing is unlikely, the FOMC must be prepared to face such a scenario. The comments spurned further concern that the US economy is slipping off of the rocky road to recovery, adding to the woes of the US currency. The USD/JPY slide began at 88.10 a little over 24 hours ago and culminated as mentioned at 86.25, eliciting comments from Japanese Finance Minister Noda who stated that he was watching the FX markets closely.
Yen crosses were all lower for the day with the dampened risk climate and falling equities across Asia. EUR/JPY slid a big figure to just under 112.70 as did the GBP/JPY pair, which was dumped to lows near 134.80. AUD/JPY saw lows under the 77.50 level, and NZD/JPY visited lows at the 62.05 neighborhood. The EUR/USD action was lackluster to end the week, with the pair touching 1.3050 after early session high nearer to 1.3075. GBP/USD was choppy between 1.5595 and 1.5625, and the AUD/USD took a hit from weak data once again, pulling it to 0.8975 lows. Australian private sector credit came in at +0.2% versus a forecast of +0.4%, thus helping to validate the probability that the RBA will not hike rates in August.
US GDP will be the key event before the weekend with the data released at 8:30Am (EST) with a forecast of 0.1%. Have a nice weekend.