Major Currency Pairs Analysis: June 25, 2013

The euro hit session highs on Monday, rallying from nearly three week lows. It rose as high as $1.3145, recovering from lows of $1.3055, its weakest level since June 5. It was last at $1.3140, up 0.1 percent. We’re seeing a stemming of the sell-off in risky assets and that has caused some mild profit-taking on the dollar, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. The euro turns positive vs. dollar, hitting session highs.
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GBP/USD
The pound reached its weakest since June 5 against the dollar, as the U.S. currency strengthened versus most of its major counterparts on the prospect of the Fed closer to ending monetary stimulus that tends to devalue a currency. The sterling has strengthened 4.7 percent in the past three months; the pound was little changed at $1.5465 after falling to $1.5345, Ten-year gilts dropped for a third day before the Debt Management Office sells bonds maturing in 2068 via banks this week. Benchmark U.K. yields jumped the most since January 2009 last week. The pound reached a two-week low against the dollar.
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USD/JPY
Japan’s central bank probably promised too much when it set a goal of lifting inflation to 2 percent within two years, according to Takahiro Mitani, president of the country’s public pension fund. History is against the Bank of Japan as it undertakes unprecedented asset purchases in pursuit of a pledge to overcome 15 years of deflation, Mitani, the 64-year-old head of the 112 trillion yen ($1.14 trillion) Government Pension Investment Fund, said in a Tokyo interview June 21. The world’s biggest manager of retirement savings, which said on June 7 that it’s cutting local bond holdings to buy more stocks and foreign securities.The BoJ thinks that if they say they will take bold measures to bring about inflation, then inflation expectations will rise and as a result prices will rise. But reality isn’t that smooth. Even in the bubble, inflation was only about 1 percent, erased an advance versus Japan’s currency and leaving it little changed at 97.80 yen.
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USD/CAD
The Canadian dollar weakened beyond C$1.05 per U.S. dollar to reach its lowest point in almost two years. The loonie depreciated against the majority of its 16 most-traded peers after Fed Chairman Ben S. Bernanke’s said last week policy makers may begin reducing $85 billion of monthly bond purchases this year if the economy achieves the central bank’s objectives. Monetary stimulus tends to devalue a currency. Canada’s dollar pared its losses after Fed Bank of Dallas President Richard Fisher said investors shouldn’t overreact to Bernanke’s statement. The loonie fell 0.3 percent to C$1.0480 per U.S. dollar.
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