RTTNews - Monday in Asia, the yen surged up against its major counterparts after a government report showed that Japan's business confidence improved in the second quarter and demand for services rose in April, adding to signs the country's worst postwar recession is easing.
Large Japanese firms were less pessimistic about the economy in the April-June quarter than they were during the previous period. The large company business sentiment index of a survey, jointly conducted by the Ministry of Finance and Cabinet Office, was at minus 22.4 in the second quarter, better than minus 51.3 in the previous quarter.
The reading indicates most companies are less downbeat on business conditions. The index is calculated by subtracting the percentage of companies saying the economy is worsening from the percentage seeing improvement.
The survey's result suggests that recent pickups in production and exports has buoyed sentiment, increasing expectations that the Bank of Japan's closely watched Tankan business sentiment survey, due on July 1, may also point toward a bottoming out.
The business survey index (BSI) of sentiment at large manufacturers stood at minus 13.2 in April-June quarter, compared with minus 66.0 in the previous quarter
The gain in sentiment at large manufacturers was the biggest since the Cabinet Office and Finance Ministry began the survey in 2004.
Another report showed that the services sector in Japan showed a resurgence in activity in April. The tertiary industry activity index rose 2.2% month-over-month in April following an upwardly revised 2.8% decline in the previous month. Economists had expected 2.3% growth for the month.
The yen advanced to a 4-day high of 95.80 against the dollar during Asian deals on Monday. The next upside target level for the yen is seen at 95.5.
The yen gained for the first time in four days today on concern Iran's political situation is deteriorating after a week of clashes between police and protesters, spurring demand for safer assets.
Splits within Iran's ruling elite deepened, with police arresting family members of an ex- president and a former nuclear negotiator saying most Iranians questioned President Mahmoud Ahmadinejad's electoral victory.
The yen typically strengthens in times of financial turmoil as Japan's trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders.
After hitting a 4-week low of 98.91 against the dollar on June 05, the yen showed strength. The yen jumped to a 2-week high of 95.53 against the dollar on June 17 as the Bank of Japan and the Cabinet office raised their economic assessment for the second straight month as some of the leading indicators suggested that the worst of the recession is over.
In its latest monthly report of recent economic and financial developments, the BoJ said Japan's economic conditions have begun to stop worsening after deteriorating significantly. With regard to the financial conditions, the central bank said situations have generally remained tight, although there have been signs of improvement.
Although the yen fell last Thursday, it rebounded after hitting a 3-day low of 97.20 on Friday. The dollar-yen pair closed Friday's North American session at 96.26.
Overall, the Japanese currency gained 2% against the dollar last week.
In Asian trading on Monday, the yen rose to a 4-day high of 133.19 against the euro. This may be compared to last week's close of 134.34. If the Japanese currency advances further, it may likely target the 132.4 level.
The yen surged up to near a 3-week high of 132.38 against the euro on June 17. But the yen declined thereafter as the euro rebounded after a report showed that the Euro zone trade surplus unexpectedly rose in the month of April.
The yen extended its slide on Thursday and slipped to a 3-day low of 135.19 in early European deals on Friday on the back of strong equities.
But the euro dropped from a 3-day high after a report showed on Friday that the German producer price index posted its biggest drop in 22 years. Thus far, the yen has appreciated 1.5% against the euro.
The yen that closed last week's trading at 89.13 against the Swiss franc climbed to a 4-day high of 88.46 in Asian deals on Monday. On the upside, 87.96 is seen as the next target level for the Japanese currency.
The yen strengthened more than 1% against the franc after it touched a 3-day low of 89.51 on Friday.
During Asian deals on Monday, the yen edged up to 157.75 against the pound. The near term resistance level for the yen is seen at 155.7. The pound-yen pair closed Friday's trading at 158.89.
The pound tumbled after the property website Rightmove said today that the asking prices for homes in most of Britain fell in June after four months of rises, but the annual rate of decline moderated to an eight-month low.
The average property asking price in the U.K. eased 0.4% month-over-month in June to 226,436 pounds. Annually, the asking price fell a steeper 5.5%.
The yen also rose to 4-day highs against commodity related currencies as oil prices steadied below $70 a barrel today.
In Asian deals, U.S. crude for July delivery fell 50 cents to $69.05, extending the previous session's over 2 percent decline, as cautiousness sets in amid geopolitical risks in Iran and North Korea.. London Brent crude fell 29 cents to $68.91.
The yen strengthened to a 4-day high of 84.22 against the Canadian dollar and 76.63 against the Aussie during Asian deals on Monday. If the yen gains further, it may likely target 83.7 against the loonie and 75.2 against the Aussie. The loonie-yen pair closed trading at 84.88 and the aussie-yen pair at 77.61 on Friday.
In Asian trading on Monday, the yen jumped to a 4-day high of 61.19 against the NZ dollar. The next upside target level for the Japanese currency is seen at 60.1. The kiwi-yen pair was worth 61.99 at Friday's close.
In the upcoming European session, Germany's Ifo Institute for Economic Research is set to release its business climate survey for June.
Meanwhile, the Italian industrial orders and current account reports for April are also due.
There are no significant economic reports expected from the U.S. today.
However, the mood remains quite cautious with investors looking for further cues from U.S. The crucial U.S. Federal Reserve meet and the outlook on the U.S. interest rates are among the major factors that are expected to dictate the trend in global markets this week.
The Fed is widely expected to leave rates unchanged after its two-day meeting ends Wednesday, but investors will closely check its statement for clues on the central bank's economic outlook.
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