Yen Gains on China Data and BOJ Bets, FOMC Minutes Ahead

The Japanese Yen advanced after China’s exports fell while the BOJ its policy meeting. The US Dollar may fall on June’s FOMC minutes and Bernanke commentary.

Talking Points

Japanese Yen Gains on China Exports Miss, BOJ Meeting Speculation
US Dollar Volatility Risk on the Downside on FOMC Minutes, Bernanke

The Japanese Yen outperformed in overnight trade, rising as much as 0.8 percent against its leading counterparts. The move higher began as carry trades funded in terms of the perennially low-yielding currency came under pressure following disappointing Chinese Exports data. Overseas sales unexpectedly fell 3.1 percent, producing the worst reading since October 2009.

Speculation about the outcome of the Bank of Japan (BOJ) monetary policy meeting may have lent added support. Japanese economic data has increasingly outperformed relative to expectations over recent months and investors may be speculating that the central bank will opt not to increase stimulus efforts when the outcome of the sit-down is unveiled tomorrow.

A quiet economic calendar in European trading hours is likely to see investors looking ahead to the release of minutes from June’s FOMC policy meeting. The June policy meeting was accompanied by a press conference that cemented the likelihood of “tapering” the size of Fed asset purchases at some point this year, which has already generated a substantial response from financial markets. With that in mind, surprise risk seems to be on the dovish side of the spectrum, with the US Dollar likely to decline if rhetoric found in the minutes or a subsequent speech from Fed Chairman Ben Bernanke serves to trim QE reduction bets.

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