The Japanese Yen outperformed amid carry trade liquidation as the Nikkei continued to lead Asian stock exchanges lower.
Talking Points
Japanese Yen Outperforms as Nikkei Continues to Lead Asian Stocks Lower
FX Markets at Risk of Knee-Jerk Trade as Liquidity Drops on UK, US Holidays
The Japanese Yen outperformed in overnight trade, rising as much as 0.6 percent against its top counterparts, as risk appetite floundered in Asian trade and encouraged an unwinding of carry trades funded in the low-yielding currency. The MSCI Asia Pacific regional benchmark stock index fell 1.1 percent.
Japan’s Nikkei 225 index led the way lower, sliding as much as 4 percent. We see recent liquidation in Japanese shares and the parallel recovery in the Yen as a reflection of profit-taking in the absence of new catalysts to propel policy speculation until the effectiveness of “Abenomics” can be credibly assessed.
Looking ahead, market holidays in the UK and the US will keep the world’s largest FX dealing centers offline, making for particularly low liquidity conditions. This is likely to make for a quiet day, although traders would be wise to remember that price swings can be amplified by thin markets can in the event of a major dislocation. This makes exchange rates particularly vulnerable to headline risk and caution is prudent.
Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index
Asia Session:
GMT
CCY
EVENT
ACT
EXP
PREV
23:01
GBP
Hometrack Housing Survey (MoM)
0.4%
–
0.3%
23:01
GBP
Hometrack Housing Survey (YoY)
0.4%
–
0.2%
23:50
JPY
BOJ Releases April Meeting Minutes
–
–
–
1:30
CNY
Industrial Profits YTD (YoY)
11.4%
–
12.1%
Euro Session:
GMT
CCY
EVENT
EXP/ACT
PREV
IMPACT
No Data
Critical Levels:
CCY
SUPPORT
RESISTANCE
EURUSD
1.2893
1.2982
GBPUSD
1.5079
1.5190
— Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak
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Source: Daily fx
