USD/JPY Breaks 99.00 as Markets Frozen by Boston Manhunt

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Market Drivers April 19, 2013
Aso comments drive USD/JPY higher taking risk with it
Events in Boston riveting but no impact on market
Europe 0.84% Nikkei 0.73%
Oil $88.60/bbl
Gold $1414/oz.

Europe and Asia:
JPY Leading Index
EUR German Producer Prices

North America:
CAD CPI 6:330

A completely schizophrenic night in the FX markets as the early burst of risk optimism gave way to complete standstill as all eyes turned to the situation in Boston where the authorities were in deep manhunt for the Marathon bomber.

Earlier in Asia comments by Taro Aso – Japan’s finance minister- helped fuel a rally in USD/JPY which powered through the 99.00 level by mid-morning European dealing. Mr. Aso reportedly noted that no one in G-20 was opposing Japan’s newly aggressive monetary policy – a comment that helped put the bid back in the pair and put it on track towards the 100.00 level.

With no other major economic news on the docket and with precious metals prices recovering, risk appetite came back into the markets and all the high beta currencies were lifted higher primarily through the yen crosses. The Aussie and cable performed best with Aussie benefiting from uptick in gold while cable was rumored to have some M&A flows supporting it in early London trade.

However, as the manhunt deepened by mid-morning European session trading in FX came to virtual halt, with traders watching the story out of Boston rather than pay any attention to economic developments.

On the economic front the G20 which is clearly being overshadowed by the events in Boston, will affirm a commitment to avoid weakening their currencies to gain a trade advantage, according to a draft statement prepared for a meeting this week in Washington, Bloomberg BNA reported. However several officials, including US Treasury Secretary Jack Lew have gone out of their way to note that Japan’s actions are aimed at the domestic market, rather than as competitive devaluation.

Such laissez faire posture by G20 has emboldened USD/JPY bulls to press on with the rally, as the risk of G20 censure has clearly disappeared. With no major events on the docket in North America traders may continue the rally in risk although trading may be slow as markets remain riveted on Boston and if a capture is made we could see a possible relief rally on purely psychological reasons alone.

Boris Schlossberg
Managing Director

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