EURUSD consolidated into a range after a sharp drop following the Bank of Japan intervention in the currency markets early in the Asian session. Dollar strengthened across the board as a result of this action, pressuring the euro which fell over 1.2 percent to a low of 1.3974 just before the European return and remained supported around that level throughout the London session. The upcoming G20 Summit in France at the end of this week will likely keep euro pressured as another round of crisis talks will cause some renewed concerns over the EU debt plan and Europe’s ability to lure capital from IMF members. Also upcoming interest rate announcements from both the European Central Bank as well as the US Federal Reserve will determine EURUSD direction.
GBPUSD fell over 155 pips after the BOJ intervention left sterling under pressure. However against the yen, the pound jumped to its highest in two months and is on track for its biggest daily gain in more than a year. GBPJPY rose 4.4 percent to the highest level since August 22, hitting 127.30. Sterling also gained against the euro as EURGBP dropped 0.5 percent to 0.8719.
USDCHF benefited from the BOJ FX market intervention earlier in the day resulting in strengthening the stronger dollar by 1.5 percent raising it from a seven-week low. After hitting a high of 0.8739 just before the European open, the USDCHF pair eased down on profit taking. Meanwhile EURCHF continues to pivot the key 1.2200 level which is where the Swiss National Bank capped euro at a maximum of 1.20 francs September 6 in an effort to stem franc strength which was hurting Swiss exports. EURCHF had downside interest in European trading.and touched a low of 1.2179
USDJPY opened in Europe at 78.93 and began to ease lower after a 5.2 percent jump in Asia following the Bank of Japan intervention in the currency markets in order to weaken the yen which was hurting exporters. Bank of Japan governor Masaaki Shirakawa told reporters that it was important to focus on risks to Japan’s economic outlook as rises in the yen would have a big impact on the country’s exports as well as corporate revenues and sentiment. He added that the speculative moves on yen recently did not truly reflect the health of the Japanese economy. This is the third intervention this year which caused dollar to rise to a three month high against yen, hitting 79.51 before sliding down to 77.74 by the European session on profit taking. Some speculate that the effect of the BOJ intervention will not last long.
USDCAD surged after the BOJ intervention in the Asian session that boosted the US dollar across the board. USD reached back to parity levels against the CAD, hitting a high of 1.0026 from 0.9922. USDCAD then fell on profit taking and the focus turned to Canadian GDP data for August. Growth reported at 0.3 percent beating forecasts for 0.2 percent growth, though slightly lower than July, which had 0.4 growth. USDCAD fell further to 0.9940.