Yen Slides To More Than 7-month Low Against Euro

23:32, 4th December 2012

(RTTNews) - The Japanese yen edged sharply lower across the board in early Asian deals Wednesday following comments made by the Bank of Japan Deputy Governor Kiyohiko Nishimura that the central bank is ready to pursue aggressive monetary easing "to achieve its price stability goal".

Speculations that the Chinese government would unveil fresh stimulative package to bolster the economy helped majority of Asian stocks recover from early losses, which in turn diminished the value of low-yielding yen.

Traders adopted a cautious stance on continued uncertainty about the looming fiscal cliff in the United States and the U.S. payroll data later in the week added to the overall sentiment, helping the yen losses limit to some extent in lower-levels.

Lawmakers in Washington are struggling to reach a deficit reduction agreement. Without action by Congress, approximately $600 billion in automatic tax increase and government spending cuts are due to go into effect at the end of the year.

House Republicans unveiled a plan Monday that they claim will reduce the deficit by $2.2 trillion over ten years, but the proposal was rejected by the White House. While the Republican plan includes $800 billion in new revenues, the higher revenues are achieved by closing loopholes rather than raising tax rates on wealthy Americans.

Democrats have claimed that the Republican plan would increase the burden on the middle class and have instead called for the Bush-era tax cuts for high-income earners to expire. President Barack Obama has indicated that any deal will have to include higher tax rates on wealthy Americans.

Analysts have suggested that lawmakers will likely continue to wrangle over how to avoid the fiscal cliff until the days leading up to the end of the year deadline.

The yen reached 107.98 against the euro, its weakest level since April 20 and down significantly from Tuesday's close of 107.26. The yen is fast approaching the psychological mark of 108.0 in the near-term and a move beyond that could lead up towards support around the 108.50 level.

The Japanese currency slipped to a 5-day low of 132.63 against the pound, compared to 131.90 hit late New York Tuesday. The yen also reached 2-day lows of 82.35 against the US dollar and 83.01 against the Canadian dollar during early Asian deals Wednesday.

On the downside, the yen may find target levels at 132.90/133.0 against the pound, 83.15 against the Canadian dollar and 82.50 against the US dollar.

The yen reached session's low of 88.86 against the Swiss franc, down by more than 40-pips from Tuesday's close of 88.44. If the yen weakens further against the franc, likely target level is seen at 89.0.

The yen fell to 5-day lows of 86.28 against the Australian dollar and 67.96 against the New Zealand dollar, down from yesterday's closing values of 85.79 and 67.35, respectively. If the yen extends slide, likely support levels are seen at 86.30 against the aussie and 68.10 against the kiwi.

Australia's gross domestic product was up a seasonally adjusted 0.5 percent in the third quarter of 2012 compared to the previous three months, the Australian Bureau of Statistics said. That was slightly below forecasts for an increase of 0.6 percent, which would have been unchanged from the second quarter.

On a yearly basis, GDP was up 3.1 percent - in line with expectations following the 3.7 percent growth in the previous three months.

Looking ahead, purchasing managers indexes from the major eurozone economies for November and the eurozone retail sales data for October are expected in the European session.

The ADP employment change for November, non-farm productivity and labor costs for the third quarter, factory orders for October and the ISM non-manufacturing composite for November are expected to garner market attention in the North American session.