The yen was stable ahead of the key risk event of Japanese elections on Sunday, December 14. Prime Minister Abe’s coalition is expected to win the elections and to even hold on to its two thirds majority, which would allow it to push through legislation through both houses of parliament. The latest survey suggests the coalition parties are on course to win more than 317 seats out of the 480 total. This would be positive for the economic reform program of Prime Minister Abe, although there are also doubts as to how effective his management of the economy has proved so far.
The yen will likely stay weak in the event of an overwhelming Abe victory, although some have cautioned with respect to the speed of the yen’s recent drop as the currency has lost around 10% against the US dollar in the relatively brief period of 1 ½ months.
The yen gave back some of its recent gains during today’s Asian session, but kept dollar / yen below the 119 mark at 118.85. The dollar was helped by positive retail sales numbers the previous day and this was most evident against the euro as euro / dollar was pushed below 1.24 to 1.2388.
Commodity currencies were under intense pressure as US crude oil futures fell below the psychological $60 mark. The Australian and Canadian dollars made fresh lows against the greenback; the aussie at 0.8214 and the loonie at 1.1550. The aussie was impacted by comments from the RBA Governor that he would like to see the currency drop to the 75 cent level. The Norwegian crown also tumbled after the country’s central bank cut interest rates by 0.25% to 1.25%.
Chinese economic data such as retail sales, industrial production and fixed asset investment were broadly in line with expectations.
Looking ahead, the market will likely focus on US producer prices for November and University of Michigan preliminary consumer sentiment for December. The consumer sentiment index is likely to rise to its highest since August of 2007, keeping the dollar well-bid.Publication source