During early deals on Monday, the Japanese yen plunged to new multi-month lows against its major counterparts as risk appetite grew, with Asian stocks extending the rally on increasing confidence that the worst for the global economy is over.
Tokyo stocks traded higher today, with the key index rising 1.24% and ending at 8,857.93.
The rocket launch by North Korea on Sunday and the immediate reactions to the same, including the extraordinary General Meeting of the United Nations, did not have any significant impact on the Asian stocks.
Positive closing by Wall Street on Friday, comments by Fed Chairman Ben Bernanke that the initiatives taken up to unclog the credit markets are beginning to yield positive results, and growing optimism that the downward economic momentum has slowed down are driving markets higher.
On Friday, the Dow closed up 39.51 points or 0.5% at 8,018, the Nasdaq closed up 19.24 points or 1.2% at 1,622 and the S&P 500 closed up 8.12 points or 1% at 842.
The Bank of Japan kicks off its two-day monetary policy meeting and will announce any adjustments to interest rates at its conclusion tomorrow.
The BoJ is expected to hold its target rate at 0.10% at its monetary policy meeting, but economists say the central bank's assessment of the economy could be changed, or measures to support corporate finance could be expanded.
In its last monetary policy meeting, the Japanese central bank left its key interest rate unchanged at 0.1% and decided to raise its monthly government bond purchases to facilitate smooth money market operations. The previous change in interest rates was a 20 basis point cut implemented in December 2008.
With an intention to ease money market conditions, the Policy Board decided to utilize long-term funds-supplying operations by increasing its outright purchases of Japanese government bonds or JGB.
The yen plunged to 101.20 against the US dollar during Monday's early deals, its lowest level since October 21, 2008. If the yen declines further, support is seen around the 102.2 level.
The yen has been trading lower against the buck since it reached a weekly high of 95.97 on March 30. The yen has lost around 5% against the greenback since then. The pair that closed last week's deals at 100.27 is currently trading at 100.89.
However, the dollar faced selling pressure against other currencies as views that the U.S. economy may have found a bottom have led investors to reduce holdings of the greenback as a safe haven.
Friday's data showed the U.S. economy lost 663,000 jobs in March following an unrevised decrease of 651,000 jobs in February. The drop in jobs came roughly in line with economists' expectations of a decrease of 658,000 levels. As investors took the figure as less dire than many had feared, it did little to dampen improved risk appetite.
With the continued decrease in jobs, the unemployment rate rose to 8.5 percent in March from 8.1 percent in the previous month, in line with expectations. The increase lifted the unemployment rate to its highest level since November of 1983.
In another development on Friday, Federal Reserve Chairman Ben Bernanke offered encouraging news, assuring that programs enacted by the Federal Reserve to unfreeze the credit markets are working. In a speech at a symposium on Financial Markets in Charlotte, North Carolina, Bernanke praised the actions of policymakers as lowering the cost and increasing the availability of credit.
In the midst of extraordinarily challenging times for the financial system and economy, Bernanke stated that he is confident that growth will be restored.
Against the European currency, the Japanese yen edged down to 137.08 during early deals on Monday. This set the lowest point for the yen since October 20, 2008. The next downside target level for the Japanese currency is seen around 156.3. The euro-yen pair closed Friday's North American session at 135.27.
The Japanese yen that reached a 2-week high of 126.43 against the euro on March 30 weakened thereafter and has lost around 8% thus far.
The Japanese currency that closed Friday's New York deals at 148.82 against the British pound plunged to a new multi-month low of 151.21 at 12:30 am ET Monday. On the downside, 156.3 is seen as the next target level for the yen. The pound-yen pair closed last week's trading at 148.82.
The Japanese unit has depreciated around 8% versus the sterling, from an 11-day high of 138.80 hit on March 30.
Against the Swiss franc, the yen tumbled to a 5 1/2-month low of 89.80 by 11:30 pm Eastern time Sunday. On the downside, the yen may test support near the 95.5 level. The franc-yen pair that closed last week's trading at 88.74 is currently worth near 89.55.
The Japanese currency has lost around 7% after hitting an 11-day high of 83.43 on March 30.
The yen also showed weakness against the currencies of Australia, Canada and New Zealand. The yen plunged to new multi-month lows of 72.78 against the aussie, 82.58 versus the loonie and 60.37 against the kiwi, compared to Friday's closing value of 71.78, 81.48 and 58.85 respectively. The next downside target level for the Japanese currency is seen around 81.6 against the Australian dollar, 87.0 against the loonie and 61.6 versus the New Zealand dollar.
The Recovery in emerging market assets, buoyed by a global plan to help developing economies last week, added to investors' appetite for riskier and higher-yielding currencies such as the Australian and New Zealand dollars.
In economic news from Australia, the TD Securities-Melbourne Institute inflation gauge fell 0.1% in March, while the annual rate rose by 2.6%. A survey from Australia and New Zealand Banking Group showed that the total number of job advertisements fell 8.5% in March from the month before, to average 147,804 a week.
In addition to the Bank of Japan, the Reserve Bank of Australia is also scheduled to announce its interest rate decision tomorrow. Some analysts expect the RBA may cut rates, while others expect the central bank to keep rates steady at 3.25%.
Looking ahead to the European session, the Eurozone sentix investor confidence report is due at 4:30 am ET. The index is expected to rise to minus 40.4 in April from minus 42.7 in March.
Thereafter, Eurozone producer prices and retail sales reports are due from the Eurostat. Producer prices are forecast to drop 1.5% annually in February, following a 0.5% decrease in January. Meanwhile, the index is expected to drop 0.5% from previous month.
At the same time, retail sales in the 16 nation bloc is forecast to decline 2.5% in February from the previous year, compared to a 2.2% decrease in January. Month-on-month, sales are expected to fall 0.4%.
Turning to the U.S., the Fed governor Kevin Warsh will speak about the financial markets at a conference in Washington D.C. at 1:00 pm ET.
From Canada, the building permits report for February and the Ivey PMI for March are expected.
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