Yen Extends Post-BoJ Gains; Dollar Slides To 8-Month Low

The US dollar fell to an 8-month low on Friday as measured against a basket of currencies, as a dovish Fed and Bank of Japan inaction weighed on the greenback. The yen meanwhile extended yesterday’s impressive rally when it achieved its largest daily gain against the dollar in seven years. The US currency slumped to a fresh 18-month low of 106.89 yen in today’s Asian session, and the dollar index hit its lowest since August 2015.

With Japanese markets closed for a national holiday on Friday, Asian equities were mixed in subdued trading, and the only major data to come out during the Asian session was Australian producer price inflation.

Producer prices in Australia declined by 0.2% over the quarter in the first three months of 2016, adding to the weak CPI figures from Wednesday. The Australian dollar was firmer though as it was supported by higher commodity prices. The Aussie edged higher to climb to around 0.7650 versus the US dollar in today’s Asian trading, moving further away from Wednesday’s two-week low.

The Canadian dollar was also lifted from stronger commodity prices, helping the loonie to rise to a 10-month high against the greenback. The USD/CAD pair was trading just off its intra-day low of 1.2513 in late Asian session.

Crude oil prices eased off slightly from another new 2016 high set on Friday. WTI and Brent crude futures hit 6-month highs of $46.32 and $48.34 a barrel respectively. It is doubtful however whether the recent gains will be sustained, as OPEC production is expected to rise in the coming months following outages from maintenance work.

Another commodity looking bullish is gold, which is benefiting from pared back expectations of immediate rate hikes by the Fed. The yellow metal was trading near its 2016 high of $1283.42 set back in March, and was last up 0.7% at $1275 an ounce.

In European currencies, the euro and the pound both firmed against the dollar but continued to face pressure against the soaring yen. The euro jumped to a 2½-week high of 1.1414 dollars in late Asian trading following comments from the ECB’s Praet. Against the yen though, the euro was approaching last week’s three-year low and was last trading just below 122 yen.

The ECB’s Chief Economist Peter Praet told a Spanish newspaper on Friday that rates are unlikely to be cut further without a “distinct worsening of the inflation outlook”.

Meanwhile, German retail sales disappointed as they slumped unexpectedly by 1.1% month-on-month in March against forecasts that they would rise by 0.3%.

The pound was also weaker against the yen, wiping out all of the past week’s gains to drop to 156.76 yen in late Asian trading. However, dollar weakness drove cable to a 3-month high of 1.4664 dollars on Friday. The pound ignored a weaker-than-expected consumer confidence reading from GfK out earlier today.

Coming up later today in the European session, Eurozone first quarter GDP estimates will be eyed along with the flash inflation figures for April. In the US session, personal income and spending data for the US will be watched closely, as will the University of Michigan final confidence reading and the latest US oil rig count.

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