Dollar rises against yen after S&P upgraded U.S. credit outlook
The greenback strengthened against the Japanese yen on Monday after ratings agency S&P raised U.S. soveriegn credit outlook from negative to stable. The USD/JPY was also supported earlier in Asian session due to the upbeat Japan's GDP data.
Versus the Japanese yen, although the greenback retreated from 98.43 ahead of Asian open (Australian market was closed for holiday) to 97.71 in Asian morning, the pair edged higher on the rally in Japan's Nikkei-225 index due to the upbeat Japan GDP (up by 4.1% annualised versus the forecast of 3.5%) and rose to 98.98 in Europe before pulling back to 98.46. Later, price penetrated said 98.98 to a high of 99.29 after S&P upgraded U.S. credit rating from negative to stable but then retreated due to the dovish comments by St. Louis Fed President James Bullard.
S&P revised U.S. sovereign credit outlook up to stable from negative and current rating is AA+. It said the 'likelihood of a near-term downgrade of the rating is less than one in three; sees tentative improvement in policy making, increased tax remittances; rating factors in lesser ability to react swiftly to public finance pressures over the longer term in comparison with officials of some more highly rated sovereigns; expects U.S. deficit to fall to about 6% of GDP this year; expect U.S. government debt as a share of GDP staying stable at around 84%'
St. Louis Federal Reserve President James Bullard said 'surprisingly low inflation may mean Fed can maintain aggressive asset buying over longer time frame; improvement in labour market conditions suggests Fed could slow pace of monthly asset purchases; a reasonable prediction is that U.S. jobless rate will continue to tick down.'
Despite euro's initial bounce from New Zealand low at 1.3184/86 to 1.3228 in Asian morning, price ratcheted lower to 1.3177 in European morning due to the dovish comments from ECB's Nowotny before recovering to 1.3230. Later, although euro fell again to 1.3183 after S&P raised U.S. sovereign credit outlook, dollar's broad-based weakness casued by Fed Bullard's dovish remarks lifted the pair above 1.3230 to session high at 1.3269 in U.S. afternoon.
European Central Bank Governing Council member Ewald Nowotny said 'accommodative monetary policy stance is still needed; with regard to the financial system, a fair amount of European Central Bank Governing.'
Although the British pound edged lower in tandem with euro from Asian high at 1.5563 to 1.5497 in European morning, price staged a recovery to 1.5552 in New York morning before falling to 1.5495 after S&P's upgrade of U.S. credit outlook. however, dollar's broad-based weakness lifted the pair above said resistance at 1.5563 to 1.5587 in U.S. afternoon.
In other news, ECB's policymaker Coeure said 'despite temporary relief brought by ECB policies, there are limits to what monetary policy can do.' German Finance Minister Schaeuble said 'that it does not see that IMF is asking for a further haircut for Greece; the conditions for using the ECB's OMT bond-buying programme do not exist.'
Data to be released on Tuesday :
Australia home loans, NAB business condition, BoJ rate decision, machine tool orders, U.K. RICS house prices, industrial production, manufacturing production, U.S. retail sales, wholesale inventories, wholesale sales. China is closed for market holiday.