JPY continued to trade on the heavy side, with the market focusing on the macro picture and geopolitics. The dollar retained a bid tone, continuing its buoyancy after Friday"s strong upward revisions in the US employment report. Geopolitical risk was influential amid fears of further nuclear tests by North Korea. USD/JPY made steady gains trading from 119.20 up to 119.51 to extinguish 119.50 barriers and fill in a slew of exporter offers at 119.30-50. Comments from PBOC"s Fang cause a modest correction into 119.05/10. He said a steady dollar decline was inevitable and it was risky to hold so many dollars. Speculative players, importers and real money names used the pullback to buy USD/JPY and the pair traded back into 119.50 ahead of the North American open.
EUR/JPY was depressed, with the topside capped amid large standing offers. There was a reluctance to test the topside too aggressively amid cautiousness over official rhetoric on EUR/JPY levels. It appears to be developing theme, with focus shifting towards USD/JPY and away from the cross. The market looks towards 120.00, while is expected to favour sideways action.
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