FX Update – January 6 – Yen Bid


The Yen posted fresh highs as stock markets continued to fall in Asia with market participants fretting about upscaling risks for a deepening conflict between the US and Iran. President Trump threatened “major retaliation” (52 targets) if Iran responded to the US assassination of one of Iran’s top generals, while Tehran vowed to expel the US from the region and Iraqi MPs have passed a resolution to expel US troops from the country. Gold prices rose a further 1.5%, and are up over 3.5% from levels prevailing before news of the US strike broke on Friday. It touched $1580 in early trades before moving to $1576, the S2 level sits at $1570.

USDJPY printed a near three-month low, at 107.76, as the Yen’s safe-haven premium rose. AUDJPY, a forex market barometer of risk appetite in global markets, pegged a 25-day, though not all Yen crosses, including EURJPY, surpassed their Friday lows. Tokyo markets returned from Japan’s extended new-year break, and the Nikkei 225 played catch by closing with a near 2% loss.

The Dollar remained generally well bid, outside the case of USDJPY, although mostly holding above highs seen on Friday. EURUSD traded a narrow range around the 1.1160-65 mark, above Friday’s low at 1.1124. Cable also saw a narrow range, just below 1.3100. AUDUSD sank back to a 0.6933 low after rebounding to an intraday peak at 0.6955, leaving Friday’s 11-day low at 0.6930 unchallenged. Oil prices, not surprisingly, posted fresh highs, with front-month WTI futures up 1.7% at $64.14, earlier posting a nine-month high at $64.72. Middle Eastern OPEC members account for an estimated 64.5% of proven global crude reserves. The rise in oil prices saw USDCAD drop back under 1.3000, reversing most of the rebound seen on Friday.

An understandably jittery start to the first full week of trading for the new year which kicks-off with today’s Services PMI’s and culminates on Friday with US Jobs day and Non-Farm Payroll data.

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Stuart Cowell

Head Market Analyst

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