Yen And Dollar Remain Strong After BOJ Policy Meeting, FOMC On Tap

Market Brief

The JPY strengthened versus all 16 major counterparts after the Bank of Japan refrained from taking additional easing steps and amid speculation the Federal Reserve will enact further measures to spur growth. The South Korean won led declines amid Asian currencies after North Korea shot artillery near its border and reports indicated China's growth is slowing. Australia's Dollar fell after the nation's business confidence reached the lowest in a year and regional shares declined. The global economy won't pick up unless the US recovers giving strength to risk appetite and the JPY will be supported. The EURJPY dropped to 112.82, USDJPY traded at 85.84 and EURUSD fell to 1.3142. The BOJ policy board kept the benchmark overnight rate unchanged at 0.1% and maintained its credit programs for lenders by a unanimous vote. The announcement came amid speculation the Fed will restart its bond-buying program to support the US economy due to be released at 1815 GMT with the Fed Chairman Bernanke saying that the outlook 'remains unusually uncertain. There are heightened expectations the Fed will consider some kind of easing action. In other news from Asia, China's exports gained 38.1% (prev. 43.9%, exp. 35%) from a year earlier and property prices climbed at the slowest pace in six months in July and China's property prices climbed 10.3% (prev. 11.4%, exp. 10.5%) from a year earlier at the slowest pace in six months in July as the government clamped down on speculation to prevent asset bubbles.

The AUDUSD dropped 0.5% to 0.9116 and AUDJPY at 78.37 after the index of business confidence halved from June to 2 points in July for a fifth straight month adding to signs higher interest rates are eroding demand for consumer goods, loans and new homes. NZDJPY traded near a two-week low at 62.25 and NZDUSD traded at 0.7249 after reports showed a slowdown in China's exports and a drop in purchases on credit cards.

Other important news to look for today would be the US non-farm productivity which probably rose 0.1% (prev. 2.8%) annually in Q2 and the German inflation report which would probably remain largely unchanged (0.2% MoM vs. 1.1% YoY).