Japanese investors will resume selling the Yen as they park money overseas in the fiscal year just started. Japanese mutual funds and corporations often repatriate overseas profits before book closing at the end of March, buoying the Yen. Speculation is growing that these March flows will reverse and the Yen come under renewed pressure as Japanese investors resume purchases of higher-yielding overseas assets. Investors are betting the Reserve Bank of Australia will hike rates to 6.5%. Markets are pricing a small chance that the Bank of England will raise rates from 5.25%. Elsewhere, news came Tuesday that the Brazilian Central Bank is planning to diversify the portfolio of the nation’s foreign-currency reserves and raise part of reserves in assets not linked to the US Dollar.
News and Events:
The Yen dropped to a one-month low versus the Dollar on Tuesday on expectations that Japanese investors will resume selling the currency as they park money overseas in the fiscal year just started. Japanese mutual funds and corporations often repatriate overseas profits before book closing at the end of March, buoying the Yen. Traders said that with the new fiscal year under way, speculation was growing that these flows will reverse and the Yen come under renewed pressure as Japanese investors resume purchases of higher-yielding overseas assets. UsdJpy was up 0.87% to 118.89 while EurJpy was up 0.46% to 158.32 after posting intraday high 158.86 and GbpJpy closed up 0.58% to 234.47 from earlier high 235.11.
The Australian Dollar retreated from a decade high against the Dollar ahead of an interest rate decision, with investors betting the Reserve Bank of Australia will hike rates to 6.5%. AudUsd traded down -1% to 0.8081. Sterling slipped -0.26% to 1.9733, easing ahead of a rate decision by the Bank of England on Thursday. Markets are pricing a small chance that the BoE will raise rates from 5.25%.
Investors will turn their attention today on the February Factory Orders report, which is expected to show a modest rebound, as well as the Institute for Supply Management’s non-manufacturing index which is expected to have climbed very slightly in March.
Elsewhere, news came Tuesday that the Brazilian Central Bank is planning to diversify the portfolio of the nation’s foreign-currency reserves. The idea is gradually to raise part of reserves in assets not linked to the US Dollar said Rodrigo Azevedo, Brazil’s Central Bank Monetary Policy Director.
Today’s Key Issues:
EUR 08:00 GMT: March Euro-zone Purchasing Managers Index Services 57.6 vs 57.5
GB 08:30 GMT: March Official Reserves (Changes) previously $403M, March Producer Manufacturing Index for Survives 57.4 to 57.6 vs 57.4
EUR 09:00 GMT: February Euro-zone Retail Sales 0.5% to 0.6% vs -1.0% (MoM) and 1.1% vs -0.1% (YoY)
US 11:00 GMT: MBA mortgage Application (March 30) 12.5% vs -0.2%
US 12:50 GMT: March ADP Employment Change 128k vs 57k
CAD 12:30 GMT: February Building Permits -8.5% vs 11.3% (MoM)
US 14:00 GMT: February Factory Orders 2.2% vs -5.6%, March ISM non-Manufacturing 55 vs 54.3
US 17:15 GMT: Fed’s Fisher speaks in Austin on US economy
The Risk Today:
EurUsd continues to hold above support 1.3260 low, and only a break there would damage the case for another leg higher and open the way toward 1.3200 (61.8% retracement of the 1.3072-1.3412 rally). Focus remains on the 1.3411 trend high from previous week, with strong resistance at the 1.3480 reaction March 11 high.
GbpUsd The rebound from Friday’s 1.9546 low has pushed above the 1.9750. Further advance might clear the 1.9850 pivot point and extend it with little resistance until the 1.9917 January trend high. The next upside trigger and minor resistance is 1.9824. Initial support is 1.9750 (former resistance).
UsdJpy consolidation phase is over and it has taken on a more positive bias, pushing beyond the 118.50 to 118.99 yesterday high. Sustained up-move above the top end of this area would confirm a bullish resolution towards 119.5 (61.8% retracement of 122.20 to 115.15 decline), ahead of 120.00 round number resistance. On the flipside, it will take a break of last Friday’s 117.17 to diminish the bullish trend.
UsdChf is holding below resistance at 1.2230 and last Friday’s high 1.2240. But it will take a break of the 1.2080 to mark a return of the broader bear trend and open the door toward its 1.2030. Lower than that, there is little support till the 1.1881 early December low. On the topside, a break of 1.2230 would instead reinstate a short-term bullish theme and open focus on 1.2356 early March high.
Resistance and Support: