RTTNews - During early deals on Wednesday, the Japanese yen plunged to a 6-1/2-month low against the British pound as stock markets across the Asia-Pacific region rose on speculation the U.S. consumer confidence data will help economic rebound, damping demand for safer assets.
The dollar and the yen are viewed as safe-haven currencies and both currencies rise, when investors turn risk averse and fall when risk appetite improves.
Tokyo stocks rose after Japan's trade surplus signaled a slowing pace of decline in exports, adding to growing signs the worst of the global slump in trade may be over.
The Nikkei average was up 1.46% or 135.99 points at 9,446.80 at the end of the morning session as strong cues from Wall Street and a weaker yen triggered some hectic buying across the board.
The more upbeat sentiment comes after North Korea rattled investors this week by carrying out a nuclear test, although analysts expect market impact to be short-lived.
The yen also declined to a 15-day low against the European currency and the Swiss franc and a 1-week low versus the US dollar.
The U.S. consumer confidence showed a substantial improvement in the month of May, according to a report released by the Conference Board yesterday, with the consumer confidence index rising to its highest level in eight months.
The report showed that the consumer confidence index rose to 54.9 in May from an upwardly revised reading of 40.8 in April. Economists had expected the index to edge up to 42.6 from the 39.2 originally reported for the previous month.
With the increase, the index rose to its highest level since September of last year, when the index came in at a reading of 61.4. The bigger than expected increase was partly due to a notable improvement in the outlook for the months ahead, with the expectations index jumping to 72.3 in May from 51.0 in April.
The report showed that those expecting business conditions to improve over the next six months rose to 23.1 percent in May from 15.7 percent in April, while those anticipating conditions to worsen fell to 17.8 percent from 24.4 percent.
Japan saw a merchandise trade balance of 69.0 billion yen in April, the Ministry of Finance said today, marking the third straight month of surplus. The April figure came in far better than expectations for a 69.5 billion yen deficit following the revised 10.3 billion yen surplus in March.
Exports plummeted 39.1 percent on year, the data showed, falling for the seventh consecutive month. That was smaller than forecasts that had predicted an annual decline of 41.9 percent after the 45.5 percent fall in March. On a seasonally adjusted basis, April exports were up 1.9 percent from March.
Imports fell 35.8 percent on year, declining for the sixth straight month. Analysts had expected a fall of 38.4 percent on year after the revised 36.6 percent decline in March.
Minutes from the April 30 monetary policy meeting revealed today that the board members of the Bank of Japan said that there was no need for additional policy steps to combat the economic slowdown. The members went on to say that policy should be based on long-term perspective.
The number of downgrades among Japanese firms may continue to increase, the board said, also cautioning not to expect a sharp rebound in commodities. The board also decided to wait and watch with interest for the results of the U.S. stress tests on financial institutions. The U.S. economy also needs additional time to bottom out, the board said.
At the meeting, the board voted unanimously to keep the overnight call rate unchanged at 0.10 percent. The central bank did not announce any new policy measures along with the monetary policy statement.
The Japanese yen edged down to a 1-week low of 95.49 against the US dollar during early deals on Wednesday. On the downside, 96.2 is seen as the next target level for the Japanese currency. The dollar-yen pair closed Tuesday's North American session at 95.04.
The Japanese yen that slipped to a 20-day low of 99.76 against the US dollar on May 7 strengthened thereafter and rose to a 9-week high of 93.87 on May 22 before reversing direction. The yen has lost around 2% since then.
The Japanese yen that closed Tuesday's New York deals at 132.90 against the European currency declined to 133.53 during today's early deals. This set a 15-day low for the Japanese currency. If the yen falls further, 134.8 is seen as the next target level.
The Japanese unit has lost around 5% against the European currency after hitting a 19-day high of 127.00 on May 18.
Against the British pound, the Japanese yen traded down during Wednesday's early deals. At 11:30 pm ET, the yen declined to 152.56 against the pound, its lowest point since November 11, 2008. The next downside target level for the Japanese currency is seen around 157.7. The pound-yen pair closed Tuesday's North American session at 151.37.
The Japanese yen lost ground after hitting a 4-week high of 139.07 against the pound on April 28. Thus far, the yen has depreciated around 9% versus the pound.
Against the Swiss franc, the Japanese yen showed weakness during Wednesday's early deals. At 7:30 pm ET, the yen touched a 15-day low of 88.03 against the franc, compared to Tuesday's closing value of 87.71. The franc-yen pair is currently trading at 87.95 with 88.5 seen as the next target level.
The Japanese unit that reached a 20-day high of 84.09 against the Swiss franc on May 18 weakened thereafter and lost around 5% since then.
The yen also declined to 16-day lows against the Australian, Canadian and New Zealand dollars.
The Japanese yen edged down to a 16-day low of 75.23 against the Australian dollar and 59.57 versus the New Zealand dollar during today's early deals. This may be compared to yesterday's closing values of 74.74 versus the aussie and 59.40 against the kiwi. If the Japanese currency falls further, 75.8 against the Australian currency and 60.4 versus the New Zealand currency are seen as the next target level.
The Japanese yen traded down against the Canadian dollar during Wednesday's early deals. At 11:25 pm ET, the yen dropped to a 16-day low of 85.82, compared to Tuesday's closing value of 85.16. On the downside, 87.5 is seen as the next target level for the Japanese currency.
The Canadian dollar rose as the crude oil prices traded above $62 a barrel today. Crude oil for July delivery was at $62.51 a barrel in Asian deals today. London Brent crude traded at $61.20.
Oil prices are now double the four-year low of around $33 struck in December, as rallying equity markets sparked hopes that recent government stimulus measures will increase the speed of a global economic recovery.
In the upcoming European session, the French and the Italian consumer confidence reports for May are expected.
From U.S., the National Association of Realtors is scheduled to release its report on existing home sales for April at 10 am ET. Economists estimate existing home sales of 4.65 million for the month.
At 10:30 am ET, the Energy Information Administration is scheduled to release its weekly petroleum inventory report.
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