On Wednesday as most international markets remained closed, there was little news about the USD, though there are expectations of volatility as the US policy makers bicker about reaching a budget deal before the automatic tax increases and spending cuts, better known as the ‘fiscal cliff’ goes into effect from next year and which threatens the bring in another recession in the country. If there are any positive developments in the negotiations then there is likelihood of high risk taking amongst the traders, which may perhaps to lead the USD to ease some its gains.
In early Wednesday Asian trade, the USD rose past 85.00 yen on the hope that the Bank of Japan (BOJ) might bring in more monetary easing steps under demands from the new government. The greenback was at 85.10 yen shortly after 00:00 GMT, the first time on top of 85.00 yen ever since April 2011 and up from 84.78 yen in Tokyo afternoon trade on Tuesday.
There are expectations that the USD will likely rise further next year.
There was little change for the euro against the dollar in the light holiday trading on Wednesday, as traders were not inclined to make large bets in view of the continuing uncertainty of whether the policy makers in the USA will be able to arrive at a deal for avoiding the menacing fiscal cliff crisis.
Trading remained subdued in view of the holidays in many Eurozone countries.
The EUR/USD hit 1.3221 in early U.S. morning trade, the session high; the pair afterward consolidated at 1.3197, easing up 0.03%. The twosome was likely to find support at 1.3144, the low of December 17 and resistance at 1.3238, the high of December 21.
Meanwhile, the euro rallied to a sixteen month high against the weak yen with the EUR/JPY up by 0.64% to hit 112.68, the uppermost level ever since August 2011.
The markets in Europe were closed on Wednesday. However, trading is expected to be light as most investors have closed their books to lock in the profits before the end of the year, thus reducing the market’s liquidity and increasing its volatility.
The yen declined to a 20 month low against the dollar on Wednesday, in anticipation that the new Prime Minister, Mr. Shinzo Abe would compel the Bank of Japan (BOJ) into more vigorous monetary easing.
The USD went as high as 85.08 JPY, the greenback’s uppermost level since April 2011, and last stood at 85.03 yen, up 0.4 percent on the day.
There is a widespread belief that the new Prime Minister will start pursuing radical motivation policies to delivering the country’s economy out of deflation. This view helped in weakening the yen and underpinned the Nikkei on Wednesday, even as Asian markets were capped in thin holiday trade.
The price of Crude oil went up in Asia as traders eye the US fiscal cliff talks, which is to be resumed shortly, with expectations.
The New York’s main contract, light sweet crude meant for delivery in February rose 46 cents to $89.07 a barrel and Brent North Sea crude for delivery in February gained 55 cents to $109.35.
The focus remained on the US budget discussions where decision makers are to meet again for arriving at an agreement to avoid the so called “fiscal cliff”, due to be effective with effect from January, next year.