Tuesday, 3 Aug 2010

Yen Strengthens As Risk Aversion Soars

The yen saw bullish movement against most of the major currencies during today's trading session. The yen gained close to 100 pips vs. the dollar. The yen also gained about 80 pips against the euro and the pound.

The yen strengthened against the majors today as disappointing data from the U.S. economy reduced risk appetite in the market, and convinced investors to look for safer assets, such as the yen. The U.S. Pending home Sales failed to reach expectations for a 0.5% rise in July, and the end result showed a decrease of 2.6%. In addition, the U.S. Factory Orders fell by 1.2% on July, well below expectations for a 0.2% drop. The negative figures have damaged optimism for the global economic recovery, and as a result boosted the yen.

Looking ahead to tomorrow, a batch of data is expected from the leading economies. Traders are advised to follow the U.S. ADP Non-Farm Employment Change. The ADP provides a forecast for the U.S. employment report scheduled for Friday, and is considered to be quite reliable. Thus, heavy volatility might be observed following the publication's release.