The U.S. dollar traded higher against all of the major currencies today. This universal demand for the greenback suggests that the dollar’s rally is fueled less by risk aversion and more by a reduction of short dollar exposure ahead of the non-farm payrolls report. We tend to see profit taking and hesitation the day before the notoriously volatile economic release as currency traders wait for the outcome before deciding what to do next. The degree of job losses will determine whether the dollar continues to fall and the recovery trade moves ahead or give overly optimistic traders a reality check.
USD/JPY LIFTED BY JAPANESE EQUITIES
USD/JPY recouped yesterday’s losses on healthier economic figures and advancements in Japanese equities. Nikkei 225 climbed to the highest level in 10 month, advancing by 1.30% as speculation of swift recovery in automakers fueled the gains. Meanwhile, the Leading Index which measures 12 distinct indices Japan’s economy rose for the third straight month to 79.8 from 76.9, the fastest pace of growth in almost three decades. Economists predict that the world’s second largest economy probably grew at a pace of 3.8% during the last quarter after shrinking by a record 14.2% in the first three month of the fiscal year. A steady improvement in industrial output fueled by increase in demand continues to drive the economy from the worst downturn in decades. With a lack of economic indicators for the remainder of the week, the directional movement of the Yen will be highly affected by risk appetite of investors. By FX360.Com