INSIDE G-10: JPY Extends Drop in Thin Trading; USD Consolidates
(Bloomberg) -- JPY drops versus all G-10 currencies and hits 1-mo. low against USD as trading thinned amid U.K. and U.S. holidays. The Bloomberg Dollar Spot Index eases off a 2 1/2-mo. high seen earlier, following Fed Chair Yellen’s comments on Friday that signaled another rate increase this year.
- USD/JPY up 0.8% to 111.24, hits 111.45, highest since April 28, in early European session
- Pair rallied earlier as leveraged and momentum accounts bought dollars across platforms, according to traders in Asia
- Japan’s April retail sales growth stalled m/m, raising odds PM Abe will delay a sales-tax increase planned for next year
- Mizuho warns Japan risks credit downgrade if Abe delays the sales-tax increase without explaining plans to cut the deficit, WSJ reports
- USD/JPY options are most active today, accounting for 35% of total volume: DTCC
- BBDXY +0.2% at 1,202.58, after rising as much as 0.3% to 1,204.28, highest since March 16
- Hedge funds switched to net-long USD in the days before Yellen’s comments, their first such position in 6 weeks: CFTC
- St. Louis Fed President Bullard says central banks can best respond when interest rates are near zero by credibly promising a one-time increase in prices
- Investors turn focus to U.S. May payrolls data due Friday after Yellen comments; Fed funds futures show market priced a 30% chance of a raise increase in June and 54% odds for July as of end last wk
- EUR/USD +0.2% at 1.1134, retreats from 2 1/2-mo. low of 1.1098 seen earlier
- Eurozone May economic confidence rises to 104.7; est. 104.4
- EUR/USD 1-wk 25d risk reversals show receding EUR bearishness, even as spot prices remain in a downtrend
- EUR/USD longs attractive as euro-area CPI data may surprise to the upside, though favor light positions before ECB and U.S. data, Nordea says
- GBP/USD -0.2% to 1.4599, trades near day low at 1.4595
- Ladbrokes says Brexit odds 5-4 on U.K. staying, turnout >65%
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