RTTNews - Wednesday in Asia, the yen plummeted against its major counterparts after the Bank of Japan's quarterly Tankan survey report showed that sentiment among Japan's largest manufacturers rose in the second quarter for the first time since December 2006, giving investors more confidence to purchase higher-yielding assets.
The yen weakened to a 12-day low against the dollar, 16-day low against the euro and a 1-week low against the Swiss franc.
The closely watched Tankan survey's main sentiment index for big manufacturers improved to minus 48 in June from a record low of minus 58 in the previous quarterly survey in March. It was a smaller improvement than a market forecast of minus 43.
Even with the rebound from a record low, business sentiment is still worse than at any time during the previous recession, which ended in 2002.
A negative number means pessimists still outnumber optimists.
Even as companies remain pessimistic, the world's second- largest economy grew an annualized 2.3 percent in the period, economists predict, following a record 14.2 percent contraction in the first three months of 2009.
The report also showed that confidence at big non-manufacturers rose to minus 29 points- improving for the first time since December 2006, from minus 31 registered in the first quarter. Large manufacturers and service companies both expect to be less gloomy in September.
The index measuring outlook for the third quarter was at -30 versus expectations for -34 and following a reading of -51 in the previous three months.
Japan's big firms plan to cut capital spending, a key driver of the economy, by 9.4 percent in the year to March 2010. That is a bigger decline than the market's forecast for a 6.9 percent fall.
Better than expected Australian retail sales and South Korea's record trade surplus released earlier today, further improved the outlook for a global economic recovery, damping demand for the relative safety of Japan's currency.
During Asian deals on Wednesday, the yen weakened to a 1-week low of 89.27 against the Swiss franc. The next downside target level for the yen is seen at 89.9. At yesterday's close, the franc-yen pair was quoted at 88.76.
After hitting a 1-month high of 86.89 against the franc on June 24, the yen has been declining and it has lost 3% thus far.
The yen that closed yesterday's trading at 135.26 against the euro slipped to a 16-day low of 136.0 in Asian deals on Wednesday. If the yen weakens further, it may likely target the 138 level.
The yen tumbled to a 7 1/2 -month low of 139.25 against the euro on June 05. Although the yen gained 6% thereafter, it weakened again after reaching a 1-month high of 131.46 on June 23.
The yen fell from a 1-month high on disappointing economic reports from Japan, including a drop in the nation's trade surplus and corporate service price index.
Adding to yen's slide, a government report showed on Friday that Japan's consumer prices declined sharply for the fourth consecutive month in May.
Thus far, the yen has depreciated 3% against the euro from a 1-month high.
In Asian deals on Wednesday, the yen slipped to a 12-day low of 97.0 against the U.S. dollar. This may be compared to yesterday's closing value of 96.37. On the downside, 98.6 is seen as the next target level for the Japanese currency.
The yen jumped to a 3-week high of 94.89 against the dollar on June 23 on the back of weak equities. However, the dollar recovered its losses against the yen on the same day after a report showed that the U.S. existing home sales increased for the second consecutive month in May.
The dollar-yen pair added to its gains on Wednesday as traders mulled over the Federal Reserve's interest rate decision and accompanying remarks.
The Federal Open Market Committee kept its key interest rate steady, leaving it at a target range between 0 and 0.25 percent. The move was widely expected.
The economic outlook that accompanied the Fed's rate decision was almost identical to comments that came along with the last decision in April, signaling that economic activity, while moderating, will remain weak for some time.
After hitting a 6-day low of 96.58 against the dollar on Thursday, the yen rebounded and gained further on Friday and closed last week's deals at 95.25.
But the yen is showing weakness this week as an advance in global stocks lessened demand for the safe-haven yen. Thus far this week, the yen has dropped 2% against the dollar.
The yen that advanced against the pound in early Asian deals on Wednesday lost ground after hitting a 2-day high of 158.19 at 8:55 pm ET. The pound-yen pair is currently trading at 159.40 with 160.3 seen as the next target level. The pair closed yesterday's New York session at 158.69.
The yen also edged down against commodity-related currencies today. The yen dropped to 78.15 against the Australian dollar, 62.59 against the New Zealand dollar and 83.43 against the Canadian dollar. If the yen slides further, it may likely target 78.3 against the aussie, 62.9 against the kiwi and 83.8 against the loonie. The aussie-yen pair closed trading at 77.74, kiwi-yen pair at 62.26 and the loonie-yen pair at 82.9 on Tuesday.
The Aussie surged up today as Australia's retail sales increased by twice as much as economists estimated in May, buoyed by spending at department stores, clothing outlets and restaurants.
Retail sales gained 1% in May, from 0.3% in April, the statistics bureau said in Sydney today. Economists were looking for a 0.5% increase.
Australia was one of the few major economies, along with China and India, to expand in the first quarter as government handouts and the lowest interest rates in 49 years spurred demand.
Traders are now likely to focus on the Reserve Bank of Australia's commodity price index for June, German May retail sales and the final June manufacturing PMI reports from the major European economies.
Across the Atlantic, the U.S. ADP employment report and the ISM manufacturing index-both for the month of June and the pending home sales and construction spending reports for May are expected.
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