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Recap: Yen weakness, pricing in tax delay

FXStreet (Bali) - The Japanese Yen was the standout mover in Asian hours, with a fest of Japanese headlines with regards to a snap election and a possible delay in the sales tax hike producing some decent two-way business today.

USD/JPY was paid as high as 106.08 during Tuesday, before some profit-taking late in the last London session (in anticipation of US festivity) led to a retracement, which accelerated to 115.00 before sizeable bids returned, re-sending the rate towards 116.00 ahead of Tokyo, from where it failed to break for a second time, following denials by Japan's Suga fn a possible sales tax hike delay until mid 2017, as initially reported by Sankei news portal.

However, disbelief in Suga's comments, especially when Japanese PM Advisor Honda said that sales tax hike is out of question if Q3 GDP lower than 3.8%, with Reuters forecasting 2.1% (big divergence the market probably noticed), led to the assumption that Japan will have no option but lose credibility on the fiscal side and confirm the delay, likely to be seen as negative by the macro community.

As Greg Gibbs, FX Strategist at RBS, notes "Abe is putting on ice a key plank of his fiscal reform (the further consumption tax hike) and it suggests that he is slipping back into the political mould of securing power for its own sake rather than exercising it boldly to achieve a better long-term outcome for his nation even if it may not have popular support."

AUD/USD was bracketed in a slim 0.8730-0.8670 range, with some late Asian attempts to break to the downside deterred by a market profile more prone to buy the dips following the major two reversal bull candles in the last 3 trading days following the US NFP. NZD/USD exhibited some early volatility on RBNZ Financial Stability Report, noting that it is still not appropriate to ease LVR lending limits, adding that NZD remains above sustainable, justified level. The Kiwi was overall supported by 0.78/7810 support, with Fonterra's announcing forecasts 2015 cash payout at NZD 5.55-5.65, way above expectations, buoying the currency.

The rest of G10 FX currencies traded in small ranges ahead of Europe, with the British Pound set to be the absolute protagonist of the session as the UK releases employment figures, but most importantly, BoE presents the inflation report. EUR/USD exchanged hands at 1.2463 heading into the Tokyo close, while GBP/USD was glued circa 1.59.

Key headlines

RBNZ Financial Stability Report: Not appropriate to ease LVR lending limits

Australia and China set for 'staged free trade agreement'

RBNZ's Wheeler: LVR limits likely eased, rather than removed

RBNZ Wheeler: NZD still has further to fall, level unjustified and unsustainable

Fonterra announces forecasts 2015 cash payout at NZD 5.55-5.65

RBNZ: Increased concerns on dairy sector - ANZ

Abe to postpone sales tax rise to April 2017 - Sankei

Japan: Pros and cons for calling a snap election

Australia Westpac Consumer Confidence Index climbed from previous 94.8 to 96.9 in November

Australia Westpac Consumer Confidence increased to 1.9% in November from previous 0.9%

Japan Tertiary Industry Index (MoM) registered at 1% above expectations (0.9%) in September

Japan Money Supply M2+CD (YoY) registered at 3.2% above expectations (2.5%) in October

Australia Wage Price Index (YoY) in line with forecasts (2.6%) in 3Q

Australia Wage Price Index (QoQ) meets expectations (0.6%) in 3Q

Japan's earthquake: No tsunami warning issued

Japan's chief govt spokesman: Denies media reports on sales tax-hike delay

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