Yen Gains On Risk Aversion

The Japanese yen gained against the greenback on Monday after minutes from Bank of Japan's latest meeting struggled to control the rally in government bond yield. The selloff in Japanese equities also gave support to the Japanese yen.

The greenback came under selling pressure ahead of Asian open and dropped to 100.80 in Tokyo morning after the release of BOJ's minutes together with initial 585 points selloff in Japan's Nikkei-225 index pushed JGB yields higher, increasing risk aversion. Price continued to remain under pressure and edged lower to session low at 100.75 in European morning, however, dollar pared intra-day losses and rebounded in thin North American session to 101.18 as U.S. was closed for Memorial day holiday.

BOJ April 26 meeting minutes showed 'a few members said it was hard to achieve 2% inflation in latter half of BOJ's 3 year projection period; one member said risks on prices were tilted to the downside; one member said should not persist in keeping average duration of its JGB buying to seven years; one member said should limit commitment of ultra-easy policy to two years, review policy thereafter.'

Although the single currency rebounded to 1.2945 in Australia, price retreated to 1.2916 at Asian open before trading sideways ahead of European open. Euro gained in thin European trading conditions as U.K. was closed for Spring bank holiday and rose to session high at 1.2949 in European morning, however, the pair met selling interest there and edged lower to 1.2922 after European markets closed.

The British pound remained under pressure in New Zealand and Australia and retreated to 1.5118 in Asian morning, however, buying interest there pushed the pair higher and price rose to an session high at 1.5157 in European morning. Later, cable pared intra-day gains and dropped to an intra-day low at 1.5087 in North American morning, due partly to cross-selling of sterling vs euro (EUR/GBP rose from 0.8536 to 0.8572) before stabilising.

In other news, Eurogroup's Dijsselbloem said he has 'great appreciation for how Portugal tackling challenges amid economic headwinds; if Portugal compliant with bailout, but more time necessary due to economic setback, more time could be considered; we want to bring banking union forward as quickly as possible; Portugal government has not asked for new easing of bailout targets; does not see political debate in Portugal as threat to adjustment programme.'

Data to be released on Tuesday:

Japan CSPI, Germany import price index, Swiss trade balance, France consumer confidence, U.S. home price and consumer confidence.