The Japanese yen rallied across the board on Wednesday morning in New York as lingering concerns about the health of the global economy propelled risk-averse traders to seek safe-haven yen.
Debt problems on both sides of the Atlantic have spooked the markets in recent weeks and traders have been seeking safer assets since the U.S. has lost its AAA rating on Friday.
Fears have become most pronounced in Europe, where exposure to Spanish and Italian debt threatens powerhouses Germany and France. The French government is set to stick to its deficit cutting plan as well as explore new measures so as to maintain its top notch AAA rating. Moody’s subsequently reaffirmed the AAA rating.
U.S. Fed’s closely watched rate decision overnight failed to keep the derailed economy on track as no word was mentioned on the implementation of further stimulus, although signaling to support the recovery with low interest rates through mid-2013.
Bank of Japan’s last week’s intervention in the forex market failed to halt yen’s sharp appreciation as the market viewed the action was not concrete enough, although traders believe further Central Bank actions at the point when the yen crosses its fresh highs against the dollar, which is almost certain in near-term.
The yen touched 76.36 against the US dollar in early New York trading, approaching its previous best of 76.29 and a move above this level could set its all-time peak.
Wholesale inventories and sales in the U.S. both increased in June, according to figures released today by the Commerce Department.
According to the figures, U.S. wholesale inventories in June were at $458.7 billion after adjustments for seasonal variations but not price changes. The increase in inventories came in below the 1 percent increase most economists had predicted. Wholesale sales for June also rose by 0.6 percent to $395.8 billion, according to the report.
The yen appreciated above 2.6 percent to reach nearly a 5-month high of 108.34 against the euro from Asian session’s 2-day low of 111.27. On the upside, 107.60 is seen as the next likely resistance level for the yen.
Germany’s annual inflation, measured under the EU methodology, increased in July as initially estimated, final data published by the Federal Statistical Office showed today. Inflation continues to remain above the two-percent threshold.
The harmonized index of consumer prices (HICP) rose 2.6 percent year-on-year in July, which was faster than the 2.4 percent growth seen in June. Month-on-month, the indicator was up 0.5 percent.
Extending its 5-day winning streak, the yen touched 123.52 against the pound for the first time since March 17. On the upside, the Japanese unit may test resistance around the 122.20 level.
U.K. inflation is set to fall back through 2012 and into 2013 with the factors temporarily raising inflation diminishes and downward pressure from slack in the labor market persists, the Bank of England said in its quarterly Inflation Report today.
U.K. GDP growth is seen at around 2.7 percent in 2012, down from 2.8 percent estimated in May. By 2014, growth is likely to be above its historical average than below it, the bank said.
The yen erased recent downtrend against the other safe-haven favorite, the franc, as the Swiss National Bank today stepped in again to contain the appreciation of the Swiss franc. The yen advanced to 104.81 against the franc shortly after the SNB and hovered around the 105.0 level thereafter.
The SNB unexpectedly cut benchmark rate closer to as possible as zero level last week and reaffirm their pledge to stop the massively overvalued franc from further appreciation which they considered harmful to the country’s exports.
The yen also traded higher against the commodity dollars in New York morning, hitting as much as 62.65 against the NZ dollar, 78.13 against the Australian dollar and 77.08 against the Canadian dollar.
Looking ahead, the US Treasury Budget is due to be released at 2:00 PM ET. The budget, a monthly account of the surplus or deficit of the federal government, is considered an indicator of budgetary trends and the thrust of fiscal policy. Economists expect a deficit of $165 billion for July.