The bounce seen in the Nikkei and the higher US equity futures left JPY on a heavier footing. Asian traders saw decent demand from Japanese importers, retail margin players and investment trust-related demand. The European session saw offshore funds, leverage account interest and speculative activity as US futures extended gains, which reduced the pressure on JPY carry trades.
USD/JPY moved from the 116.25/30 area up to a 116.67 high. Offers at 116.60 were cleared but the pair met decent supply at 116.70, with exporters and intra-day profit taking noted. EUR/JPY saw a similar theme, pushing up from 152.35/40 up to the 153.00 handle. Offers at 153.00/05 capped gains and the pair slipped back towards the 152.70 area, while USD/JPY consolidated around 116.50 ahead of the US open.
Today's equity performance will drive price action and will determine whether the latest recovery in USD/JPY and EUR/JPY are simply corrections from their recent lows or the catalyst for fresh carry trade interest. Suspection raises that any price movement will be restricted ahead of Friday's US NFP, which will have implications for the dollar ahead.
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