The USDJPY gained on speculation Japanese exporters are converting overseas revenue before the fiscal year ends tomorrow after falling yesterday as economic pace picked up on Greek issue of 7 year bonds worth EUR 5 Billion stoking demand for higher yield assets. The pair also moved up after unemployment levels in Japan remained unchanged at 4.9% underscoring an uneven economic recovery that has yet to end deflation and industrial production fell 0.9% after a 2.7% increase in the previous month with policy makers blaming it on reaction to January’s gain and China’s Lunar New Year holiday slowing exports to Japanese markets. The reports highlight the challenges for BOJ policy makers, who have said economic growth has matched or exceeded their projections even as consumer prices keep falling. Without clearer evidence that the recovery is faltering, the central bank may next week hold off on any further expansion in its liquidity injections.
AUDUSD carried yesterday’s bullish momentum on expectations accelerating economic growth will prompt the RBA
to raise interest rates. NZDUSD traded near its strongest in more than a week after a government report showed home-building approvals increased 5.9% (expectation 2%) in February for the first time in three months adding to signs residential construction will help buoy economic growth this year and spur the RBNZ to raise its benchmark interest rate. NZDUSD traded at 0.7095 while AUDUSD traded at 0.9172 rising 1.5% the most since Feb. 16. Declines in AUDUSD were limited before reports tomorrow forecast to show retail sales gained 0.3% in February and building approvals rose 2.1%. RBA said its policy actions took into account that home-loan rates have risen more than its benchmark interest rate, suggesting fewer increases are needed to return borrowing costs to normal levels.
The EURUSD traded near a one-week low as signs the global economy is improving damped demand for the USD as a refuge. Despite the enhanced figures, the EURUSD tipped lower and pulled back from the high to hold around 1.3475, and the lack of momentum to cross back above the 20-Day SMA
at 1.3584 could keep the pair within the narrow range carried over from the previous week as investors weigh the prospects for future policy. After positive consumer and business confidence figures, investors’ focus will now shift to Wednesdays release of EU CPI for March which are expected to point to an upside surprise in the final reading. ECB Governing Council member Nowotny said that the ECB is currently debating exit strategies and does not see any problem with the EU aid or the involvement of the IMF in the Greek crisis. Nowotny also added that the EU deal on Greece looks positive thus giving a much needed boost to the EURUSD.