Yen under Pressure Again - 9.1.2013

The US dollar strengthened against the Japanese yen in the morning on Wednesday after showing a two-day drop at the beginning of the week. The currency pair found support slightly below 87.00 and rose to 87.50 in the aftermath. Monetary easing expectations are the major factor weighting on the national currency exchange rate. Market participants expect the Bank of Japan to consider another increase in asset purchase program and an increase in inflation target from 1% to 2% at the next meeting on January 21-22. The euro also strengthened against the yen in the morning – the pair rose from 113.59 to 114.51. The single currency has been staying in a narrow range against the US dollar 1.3066-1.3092 in Asian trading hours. Yesterday the euro fell under pressure versus the greenback as relatively poor retail sales statistics for the euro area was published. The indicator rose in November by 0.1% and fell by 2.6% in annual terms (see chart), while both figures turned out worse than forecasts. Unemployment rate at the same time increased to 11.8%. However the key risk factor for the euro is tomorrow’s ECB policy meeting. The currency receives some support from expectations that the regulator will keep interest rates unchanged. Eurozone, retail sales The Australian dollar is holding on the 1.05 mark against the greenback. Retail sales data reading in Australia today turned out weaker than expected. The indicator fell in November by 0.1% against expectations of a 0.3% rise. However the currency was supported by high commodities prices, including iron ore, taking into account the nation’s reliance on exportations, helping the exchange rate hold close to its January high of 1.0525.