Broad - based increase in risk appetite had the pair resume its range bound trading early on in the week. The downside bias was breached after the BoJ decided to leave the policy rate and the size of its asset - buying program unchanged at the latest meeting.
The dovish tone of the central bank’s statement along with a downward revision to Japan’s growth for the fiscal year 2011 (0.4% contraction as compared to a 0.3% expansion earlier), flushed the yen lower.
An unexpected annual trade deficit, the first one in more than 30 years only contributed to the yen’s slide. Persistent strength of the yen along with the March tsunami and earthquake hampered Japanese exports while an increase in energy costs pushed imports higher.
The deficit sparked a sell off for the export dependent country’s currency, pushing it to a one - month low against its U.S. counterpart. However, by the end of the week, the bears took control following the disappointing fourth quarter U.S.
GDP data which also dropped yields on the much sought after U.S securities. An increase in Japanese retail sales on the heels of a rebound in consumer spending had the pair resume its downward bias, falling just short of the rumoured Japanese intervention levels.
Courtesy: CPM Group for DGCX
