The yen extended its decline in the Asian trading session and fell against all of its major counterparts. USDJPY climbed further, up from the open of 80.81 through 81.42. EURJPY rose from 106.09 to 106.88. On Monday the pair touched a two-month low of104.60. Market sentiment has improved in the past two days, thereby reducing demand for the safe haven Japanese currency. Meanwhile, there are reports that the Bank of Japan may raise its inflation forecasts, fuelling speculation the central bank will expand monetary easing. This usually has a weakening effect on yen.
EURUSD remained steady above 1.3110, holding on to gains after a sharp rally yesterday following a successful Spanish short-term bill auction. Yields on the benchmark 10-year bond slid 18 basis points to 5.89 percent yesterday after Spain raised more than its maximum target at a bill sale. Investors are waiting for the Spanish bond auction on Thursday which is more significant. The Spanish government will auction 3.3 percent two-year notes and 5.85 percent 10-year debt tomorrow.
GBPUSD consolidated gains above 1.5915 after advancing yesterday following the UK inflation report that gave rise to speculation that the Bank of England will not be inclined to expand quantitative easing in May. The focus turns to the minutes of the April BOE policy meeting which will be published today.
The Australian dollar remained higher against most of its major counterparts buoyed by upbeat market sentiment and higher regional equity markets . AUDUSD remained above 1.0385 after advancing from 1.0303 early Tuesday. A report by the International Monetary Fund helped buoy the aussie. The IMF raised its economic growth outlook and said Australia has the strongest economy in the developed world and it is expected to outperform all comers for at least the next two years.