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Asia Recap: Brief $ drive above ¥105.50, focus on NFP

FXStreet (Bali) - The Japanese Yen and the US Dollar led the most notable moves in the FX pace, although follow through failed to be sustained as traders remain cautious ahead of the US NFP report, which may seal the perfect week for the interest of US Dollar longs.

USD/JPY hit a new 6-year high at 105.72 after tripping stops above the 105.50 level, however the move was short-lived, with Tokyo fading the move and sending the rate to be paid back around the 103.25/30 support level. As per the AUD/USD, tight consolidation between 0.9346 and 0.9330 was seen. NZD/USD was pressured again, setting new 6-month lows at 0.8269 before it stabilized around 0.8285/90. EUR/USD saw no bounce after the loss of 2 cents on Thursday's ECB-led sell-off, trading around 1.2930-/35 lows. GBP/USD made new lows at 1.6284, with Pound's bearish sentiment continuing on the combination of fears of a'yes' vote in the Scottish independence referendum Sept 18 and the US index strength.

A story that didn't get much attention during Asia was a working paper published by the Federal Reserve, titled "Labor Force Participation: Recent Developments and Future Prospects", noting that "our overall assessment is that much - but not all - of the decline in the labor force participation rate since 2007 is structural in nature", a story that should strengthen the Fed hawkish case (USD bullish), as the conclusion suggests that weak labor demand didn't play that big of a role as might have been previously thought.

We saw plenty of US Central Bankers hitting the wires, first was Fed's Powell who said, on one hand, that the labor market has improved substantially and that "significant parts of the FOMC statement need to change", suggesting that a rhetoric towards tighter policies might start to be strongly considered, while on the other hand, Powell said "labor market still has a lot of slack", and that "the strong USD could hold us back." Then came Fed's Fisher, noting that he has never seen such ebullient credit markets, adding that he doubts US inflation has cooled. Lastly, Fed's Kocherlakota said that "low inflation shows economy is running sub-capacity" and that "U.S. interest rates are too high."

In the fundamental front, a Nikkei survey unveiled that Abe cabinet public approval soared by 11 points to 60%, just 2 days after the cabinet's reshuffle. Japanese politicians crosses the wires too. Japan finance minister Aso said that "sudden FX moves are the most undesirable." Then Japan chief cabinet secretary Suga was cited as saying that "the BOJ has sole responsibility for monetary policy." Japan economy minister Amari noted that "the yen decline reflects dollar strength." The newly appointed Japan health minister Shiozaki said "it is important to make sure real wages grow." In New Zealand, the finance minister Bill English noted that the Kiwi dollar will fall further as the U.S. economy recovers. Lastly, in Australia, the AiG construction index increases at its highest rate since the GFC, at 55 vs 52.2 last.

Main headlines

Fed paper concludes US labour participation decline structural in nature

Australia AiG construction index increases at its highest rate since the GFC.

NZ FinMin English: Kiwi dollar will fall further as US recovers

Japan JP Foreign Reserves fell from previous $1276B to $1278M in August

Fed's Powell: Labor market has improved substantially, strong USD could hold us back...

Fed's Fisher: Doubts US inflation has cooled

Fed's Fisher: I have never seen such ebullient credit markets

Fed's Powell keeps providing hawkish clues

Fed's Kocherlakota: This nation needs more inflation

Japan Leading Economic Index rose from previous 105.9 to 106.5 in July

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