Forex Market Review – Yen weakens after Japan records first trade deficit in 30 years

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The yen weakened to one – month lows against the dollar and euro after Japan reported its first deficit in thirty years. Japan recorded an annual trade deficit in 2011 for the first time since 1980 as the devastating March earthquake, tsunami and nuclear crisis pushed up energy imports. Also the strong yen and supply chain disruptions weighed on exports. USDJPY surged to 77.97 after climbing from 77.60. EURJPY rose from a session low of 101.12 to 101.55, the highest level since December 28.


The euro hovered around the $1.30 level in Asian trading, little changed against the dollar from the US session. The euro was kept supported following data on Tuesday showing a surprising strength in eurozone manufacturing and services this month, which gives some optimism that the region may escape recession. EURUSD opened in Asia at 1.3034 and hit a session high of 1.3044.


The Australian dollar gained against the US dollar after inflation numbers came in lower than expected, prompting speculation that the Reserve Bank of Australia will now hold off cutting interest rates. Quarterly CPI was flat in the last quarter, versus a 0.6 percent rise in the previous. AUDUSD hit a session high of 1.0533 after reaching a low of 1.0447.


The focus today will be on the US Federal Open Market Committee (FOMC) which is due to conclude its two-day meeting later today. For the first time, the FOMC is to release forecasts made by FOMC members for the Fed’s interest-rate target. The FOMC will also provide views on the likely timing of the first rate hike by the Fed.