Big Drop On Nikkei Prompted Yen Rally

The U.S. Dollar traded mixed following the release of positive sales and jobs data. However, the releases were overshadowed by volatile trading and a big drop on Japan’s Nikkei, prompting the Yen to rally. Investors have grown concerned over the 6 percent decline in Japanese equities as it means that stocks dropped more than 20 percent. Optimism dominated the Forex market as the U.S. indicated that Retail Sales went up 0.6 percent in May after a 0.1 percent hike the previous month. Core Retail Sales which don’t include auto and gasoline sales rose 0.3 percent as expected. The Labor Department stated that that the number of individuals who filed for unemployment benefits week before last dipped by 12,000 to 334,000; economists only anticipated a fall of 1,000 to 345,000. Despite the solid figures, the greenback plunged versus the majority of its peers, amid speculation the Federal Reserve may begin scaling back its stimulus efforts. The U.S. monetary unit remained weak following comments by the World Bank suggesting that the global economies will expand 2.2 percent rather than the previously forecast 2.4 percent. Gold Prices dropped even though the U.S. Dollar weakened. This took place as investors were uncertain of the Federal Reserve’s next move regarding monetary policy. While gold and the greenback usually move inversely from each other, they both depreciated as speculators opted for the Yen. Gold Futures for August delivery settled at $1,377.95 a troy ounce on the Comex Division of the New York Mercantile Exchange. Despite solid data out of the U.S., market investors felt that the figures did not provide them enough clues regarding the fate of U.S. stimulus.

The greenback advanced versus the euro, subsequent to the announcement of better than predicted Retail Sales and Unemployment data out the U.S. However, the shared currency recouped some of its losses as risk appetite ebbed amidst uncertainty over the Federal Reserve’s next steps. On Friday, investors shifted their focus to a number of releases out of the Euro region including Consumer Price Index. The British Pound traded steady against its U.S. counterpart.

The Yen rallied and extended its biggest three-day advance since 2008, after the Nikkei 225 Stock Average saw a large decline fueling demand for safe havens. The Japanese currency increased against the majority of its counterparts on data confirming that investors reduced their holdings abroad. According to official figures, money managers reduced their foreign bond holdings by 386.9 billion Yen.

Lastly, in the South Pacific, the Australian Dollar firmed up against the greenback subsequent to a report which showed that employers added more payrolls in May than forecast. The report also revealed that the level of Unemployment ticked down. In New Zealand, the Reserve Bank left the key cash rate at 2.5 percent and cut the growth forecast for the year up until March of 2014 from 3.3 to 3 percent. This caused the Kiwi to trade lower versus the greenback.

EUR/USD- Euro Dips On Retail Sales
The euro weakened against the U.S. currency after the release of better than forecast economic data helped erase the greenback’s early day decline. Given the fact that there were no important economic releases out of the eurozone, the 17-nation currency moved sideways for the most part of the morning. The euro remained under pressure as the World Bank reduced its growth forecast for the region, for 2013 from -0.1 to -0.6 percent.
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GBP/USD- Sterling Holds Steady
The British currency traded steady against the greenback, after the U.S. released better than expected Retail Sales and Jobs figures which spurred uncertainty over the future of the U.S. monetary policy. Given the lack of economic releases out of the U.K., the Sterling moved sideways for most of the day.
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AUD/USD- Aussie Gains On Solid Data
Australia’s Dollar advanced against its U.S. peer after domestic data showed that the number of employed individuals in the South Pacific nation increased by 1,100 in May, exceeding forecasts for a 10,000 drop. The release also indicated that the rate of Unemployment fell from 5.6 percent in April, to 5.5 percent in May, even though economists predicted a no-change. The currency’s gains were capped as investors traded cautiously.
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USD/JPY- Yen Extends Rally
The Japanese currency extended its rally against the greenback, as investors continued to wonder about the fate of the U.S. monetary policy. Last week, the Bank of Japan announced it will refrain from implementing additional stimulus measures. The Yen extended its rally as the Nikkei entered into bear market territory, and data showed that investors reduced their holdings overseas.
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