JPY made up further ground as the market favoured risk reduction. The market followed on from yesterday's session, yet saw further JPY gains amid rumours of a near-term rate hike in Japan after good data and speculation of a Chinese rate hike. Fears of much stronger than expected Chinese data spooked the market, yet the GDP release came in just above consensus at 11.1% y/y, while CPI showed 3.3%.
Market participants sold JPY on the release and USD/JPY was able to rally from the 117.60 area up towards 118.00. EUR/JPY rallied sharply amid Japanese bids at 159.60 and reports of good Eastern European demand for EUR/JPY, GBP/JPY and NZD/JPY. AUD/JPY and NZD/JPY posted modest recoveries, with bargain hunters and Japanese margin traders taking advantage of the cheaper levels.
USD/JPY did little to impact the broader market, with prices held close to 117.90 for a large part of the European morning after the recovery. Option strikes at 118.00 and an overhang of offers capped, while the downside elicited support amid JPY cross bid interest and a large Japanese presence towards the 117.60 region.
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